Singapore's exports and renminbi revaluation

The International Enterprise Singapore has reported that Singapore's non-oil domestic exports grew 8.0 per cent on a year-on-year basis in December. However, on a month-on-month seasonally-adjusted basis, it increased by only 0.3 percent last month, after a 9.1 percent decline in November.

Non-oil retained imports of intermediate goods, a short term leading indicator of overall manufacturing activities in the months ahead, posted a 5.9 per cent decline on a month-on-month seasonally-adjusted basis in December, reversing the 4.1 per cent expansion in November 2004.

The trend seems to show that Singapore's exports have peaked and have started to decline. However, both government and private sector economists expect exports to pick up again in 2005.

A continued weakening of the US dollar, however, may upset this forecast, especially if renminbi revaluation fails to take place, allowing Chinese manufacturing to become even more competitive even as US demand flags with the weakening US currency.

And based on what was recently reported on the People's Daily Online, renminbi revaluation does seem unlikely to occur this year.

Fan Gang, director of the National Economic Research Institute China Reform Foundation, reportedly said at a recent seminar that the Chinese central government will not allow the renminbi to appreciate this year. He warned that a revaluation could bring unemployment shocks. He said that the market is speculating on a renminbi revaluation, but thinks that as long as speculation money stays in the market, the central government will not consider revaluation.

See also "China states stand on foreign exchange reserve".