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Demand for imports likely to ease, says economist

(Xinhua)
Updated: 2010-04-12 12:56

Although China registered the first monthly trade deficit last month in six years, that would be temporary as the demand for imports is likely to ease with the expected moderation in domestic fixed asset investment, said an economist of JP Morgan Chase.

"With an anticipated recovery in developed economies this year, Chinese exports should improve gradually over the coming months," said Jing Ulrich, chairman of China Equities and Commodities of the US bank in a research note Saturday.

That will be proved by the forward looking new export orders component of China's official PMI (Purchasing Managers's Index) which increased to 53.7 in March from 50.3 in February, she said.

China reported trade deficit of $7.24 billion in March, the first since April 2004, as exports rose 24.3 percent year-on-year, while imports jumped by 66 percent.

"The pace of China's export recovery and dynamics of imported inflation will shape the country's approach towards currency valuation. A return to the policy of gradual RMB appreciation would allow China to mitigate imported inflation and promote domestic consumption by boosting household purchasing power in local currency terms," she said.

She noted that in the longer-run, more flexibility in China's currency regime would allow the central bank to set monetary policy with greater independence from the US Fed Reserves.