Reuters: US Dollar Report: WRAPUP 1-China urged to act on growth as exports show spark

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WRAPUP 1-China urged to act on growth as exports show spark May 25th 2012, 11:18 Fri May 25, 2012 7:18am EDT * China should step up efforts to spur growth - c.bank adviser * China could cut RRR, interest rate cut unlikely - adviser * China exports up 27.3 pct on yr in first 10 days of May * Country faces stern trade environment - vice minister By Kevin Yao BEIJING, May 25 (Reuters) - China should step up efforts to spur economic growth, including cutting the amount of cash that banks must hold as reserves, a central bank adviser said on Friday, even as the government saw tentative signs of a recovery in exports. Recent comments by Premier Wen Jiabao and other leaders have fuelled market expectations that the government could roll out more stimulus measures to combat an economic slowdown. Wen said this week the government would step up policy fine-tuning to give more attention to supporting growth and existing government spending plans on key projects should be brought forward. "The government intends to stimulate the economy, but the intensity is probably not enough," Song Guoqing, an academic adviser to the People's Bank of China, told Reuters in an interview. "There are some downward pressures (on the economy). Banks' reserve requirement ratio (RRR) could be lowered in line with the situation," said Song, an influential economist at the prestigious Peking University. China has cut 150 basis points from RRR in three moves since November 2011, bringing the rate down from a record high of 21.5 percent. Analysts polled by Reuters this month expected another 100-bps cuts this year and forecast annual economic growth to dip to 7.9 percent in the second quarter - the sixth successive quarter of slowdown. Song expected the world's second-largest economy to grow by 8.2-8.3 percent in 2012, slowing from 9.2 percent in 2011, and annual inflation to be about 3 percent. Hong Kong billionaire Li Ka-shing was more bearish, expecting 7.5 percent growth this year as China grapples with a slowdown in consumer spending and exports. VOLATILE TRADE DATA Meanwhile, the Commerce Ministry offered a ray of hope on Friday by saying that annual export and import growth showed signs of acceleration in the first 10 days of May, though it remained wary of "a relatively stern trade environment". Exports grew 27.3 percent and imports rose 28 percent in the first 10 days of May compared with the same period of last year, Vice Commerce Minister Li Jinzao told a news conference. "There are signs of things turning better from data in the first 10 days of May," Li said. "They are making us more confident about achieving this year's trade target. "But we also clearly know that there will be no quick and significant improvement in the global situation, and we are still confronted with a relatively stern trade environment." China aims for annual growth of 10 percent in exports and imports this year and is running far short of both. The first four months of 2012 saw exports grow 6.9 percent on the previous year while imports grew 5.1 percent. Last month's data was a reminder of how volatile the trade account can be and that readings given before the full numbers are calculated are prone to restatement. Premier Wen, for example, said in April that China's export and import growth had picked up to 12.7 percent and 8.3 percent year-on-year for the period April 11-20. The full data published on May 10 revealed import growth in April was just 0.3 percent on the previous year and export growth was 4.9 percent. The European Union, China's largest export customer, is struggling to contain contagion risks from a Greek debt crisis that is unnerving global financial markets. YUAN WEAKNESS The HSBC China Flash Purchasing Managers Index, the earliest indicator of activity in the country's vast factory sector, showed faltering demand in May as export orders fell to two-month lows. That suggests surprise weakness in China's April economic data persists. Song, who joined the central bank's monetary policy committee in March, said it was necessary for the government to roll out more stimulus measures, although such steps may take some time to show effect. Song said leaders were concerned about the growth slowdown as it had taken a toll on earnings of companies. GOME Electrical Appliances Holding Ltd reported an 88 percent drop in net income for the first quarter from a year earlier, partly reflecting the expiration of government subsidies on home appliances. The Chinese yuan, however, should not necessarily pose a problem to trade. "The exchange rate will be around this level this year. There won't be any big change," he said. The yuan, which has lost 0.8 percent of its value against the dollar this year, hit an intraday low of 6.3525 versus the greenback, breaching a previous 2012 low of 6.3471 seen on March 14. Link this Share this Digg this Email Reprints

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