China’s foreign trade exceeds expectations not only due to the impact of “front-running” before the holiday
Bloomberg Asia Chief Economist Shu Chang and Bloomberg Economist Qu Tianshi wrote that China’s trade data in January was much stronger than expected – alleviating concerns that exports may collapse . Exports increased by 9.1% year-on-year, fully recovering from the 4.4% decline in December, defying widespread expectations of another decline. The decline in imports during the month was also smaller than expected.
Affected by the Spring Festival holiday, the data at the beginning of the year is particularly unstable. Even so, January’s better-than-expected foreign trade performance was not just due to a “jump start” before the long holiday in February. The lack of details makes it difficult to determine the specific factors driving trade growth. It’s possible that last year’s scramble for exports due to concerns about rising U.S. tariffs was actually smaller than expected. If this is the case, it would mean less of a drag on export growth in 2019.
January’s strength aside, exports continue to face a tough external environment despite encouraging signals from recent trade negotiations with the United States:
●The final outcome of the trade negotiations remains uncertain. Even in the favorable scenario of a deal, we expect the current 10% tariff to remain in place. If it continues to be implemented for a long time, China’s export companies, especially those with lower profit margins, will face fierce competition from other low labor cost exporting countries
●External demand looks more fragile. The weighted purchasing managers’ index of China’s major trading partners continues to show a downward trend. Trade weakness intensifies with other major exporters such as South Korea
Thursday’s trade data is likely to boost market sentiment, especially with the news of U.S.-China trade talks yet to come There is little news and a lack of more economic activity data for January.
Details:
●Exports increased by 9.1% year-on-year, and the market consensus was for a decrease of 3.3%
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●The strength of exports cannot be explained solely by the head start factor before the Spring Festival holiday. This year’s Spring Festival holiday falls in early February, and some exporters, especially small exporters, stopped work before the end of January. Last year’s Spring Festival holiday fell later in February, so there were fewer effective working days in January this year than last year
●Imports in January fell by 1.5% year-on-year, a much lower decline 7.6% in December and market consensus of 10.2%
●Exports increased in most product categories, indicating export resilience
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