China reported stronger export and import figures for February than expected, with the net result of a smaller than expected trade surplus.

In fact, February's trade surplus of $7.6 bln is the smallest in a year and a bit more than half of the January surplus. This is consistent, however, with an under-appreciated development that we think is important.

I am loath to rent. I just can’t stomach the idea of paying for someone else’s mortgage. When I first arrived in China back in 2006, I fully intended to buy property once I got the lay of the land. But when I started looking, I quickly realized that residential real estate was pricey, even by Boston standards.

And since then, it has only gone up. Conversely, rents are very reasonable and have increased only modestly. Renting here always seems to make more sense than buying. Anyway, after nearly four years in China, I spent the last two weeks looking for a new apartment to rent in a better part of town, which has opened my eyes to what appears to be a frighteningly large bubble. While I haven’t done any formal research, there is a tower of anecdotal evidence that suggests that the current market prices of residential real estate are unsustainably high, at least in Shanghai and other first-tier cities.

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With yesterday’s explanation of exchange rates, we can now examine investment opportunities resulting from a Chinese yuan increase. My focus will be on Chinese company stocks.