BEIJING: China’s exports unexpectedly returned to growth in January after a shock decline the previous month, while imports fell much less than expected, but analysts said the strength was likely due to seasonal factors and predicted renewed trade weakness ahead.
Investors and policymakers are closely watching to see how quickly activity in China is cooling, or if support measures announced last year are starting to take hold, which could lift some of the gloom hanging over the global economy.
But data on Thursday left many China watchers none the wiser about the current state of the world’s second-largest economy, as a March 1 deadline looms for Beijing and Washington to de-escalate their bitter trade war.
January exports rose 9.1 per cent from a year earlier, customs data showed, defying economists’ expectations for a 3.2 per cent drop and a marked turnaround from December’s 4.4 per cent decline.
Imports fell 1.5 per cent, much better than forecasts for a 10 per cent slide and narrowing from December’s 7.6 per cent drop. That left the country with a trade surplus of $39.16 billion for the month.
While the readings appeared positive at first glance, analysts warned that data from China early in the year must be treated with caution due to business distortions caused by the long Lunar New Year holidays, which started on February 4 this year.
Many companies rush out shipments or replenish their inventories of raw materials ahead of the holidays.
“Clearly, the numbers surprised the market on the upside. But given the deceleration of global (factory readings) and weak Korean trade data, it might be premature to conclude that the trade prospect has improved based on the January number alone,” said Tommy Xie, China economist at OCBC Bank in Singapore.
“I suspect that the recovery may be partially due to the Chinese New Year effect as this year it is slightly earlier as compared to last year.” Economists had widely tipped that China would see weaker exports early this year.
Factories have reported shrinking overseas orders for months and warehouses in America are packed to the rafters with Chinese goods that retailers stockpiled last year in anticipation of more US tariffs.
Trade has also been faltering globally amid rising protectionism and a loss of momentum in some major economies, most notably in Europe.
Net exports actually dragged on China’s growth by 8.6 per cent last year, according to Reuters calculations.
Factory surveys have also show weakening domestic orders, and broader economic weakness is taking a toll on both business and consumer confidence. Retail sales during the Lunar New Year holiday rose 8.5 per cent from a year earlier, still solid but the slowest pace since at least 2011.
China’s economic growth slowed to 6.6 per cent in 2018, weighed down by rising borrowing costs and a clampdown on riskier lending that starved smaller, private companies of capital and stifled investment.
— Reuters
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