China exports rebound, but outlook is murky

Reuters/BeijingChina’s export growth rebounded surprisingly sharply to a seven-month high in December, a strong finish to the year after seven straight quarters of slowdown, but subdued global demand means that the spike may not herald an enduring recovery. Uncertain trade prospects contrast with data that showed resilient local loan demand, further evidence that the world’s second-largest economy rebounded towards 8% annual growth in the last quarter of 2012 on firming domestic demand. That modest revival may reassure China’s new leaders after a once-a-decade power transition at the top of the Communist Party in November, and follows a raft of pro-growth policy steps designed to support the economy - poised to post its slowest full-year growth figure since 1999. Trade data released yesterday showed the value of China’s exports grew 14.1% last month compared with a year earlier, racing past forecasts of analysts polled by Reuters, who had expected annual growth of 4%. Economists said the pick-up in exports growth from November’s 2.9% rise was likely accentuated by lower comparison figures a year ago and exporters clearing year-end orders, factors that do not suggest a sustainable turnaround. The customs office, which released yesterday’s data, agreed. “China trade still faces uncertainties in 2013,” said Zheng Yusheng, a spokesperson for the customs office. “But we expect the trade situation will be relatively better compared to 2012.” A senior researcher at the Commerce Ministry’s think-tank said exports were likely to grow 8 to 9% this year, slightly faster than in 2012. “The US economy is recovering slowly and we need to watch whether Europe’s debt crisis could be brought under control,” Li Jian, head of foreign trade research of the Chinese Academy of International Trade and Economic Cooperation, told Reuters. The value of imports grew 6% on the year in December, also handily beating market forecasts for a 3% rise and quickening from zero growth in November, lifting the trade surplus a two-month high of $31.6bn. For 2012, China likely ran a current account surplus worth 3% of GDP, said Haibin Zhu, a JPMorgan economist. And the surplus should stay little changed at 2.9% of GDP this year as lacklustre exports growth and sturdy imports demand keep the trade gap in check, he said. The surplus on the current account, the broadest measure of trade with the rest of the world that includes merchandise transactions and services, has come down from more than 10% of GDP in the middle of the last decade. That decline will help offset any criticism of China’s currency and trade policies after yesterday’s data showed the trade surplus swelled almost 50% in 2012 to $231.8bn from a three-year low in 2011. China’s trade surplus with the US rose 8.2% to $218.9bn, the figures showed. The year-end export surge was not enough to help China meet its 2012 growth targets for trade, underlining that exports have been the biggest drag on its economy for two years. For 2012, China’s exports grew 7.9% and imports were up 4.3%, both well under their 10% target. “At the year-end, exporters tend to respond quickly to increases in external orders,” said Ma Xiaoping, economist at HSBC in Beijing. “If you look at the fundamentals of US and Europe, this could be a temporary rise. In coming years, we expect export growth to remain at a low level, below 10% for 2013.” The trade numbers followed credit and money supply data that pointed to resilient demand for loans in China. Central bank figures showed China’s M2 measure of money supply grew 13.8% in December from a year earlier, broadly in line with market expectations for a 14% rise. Banks were shown lending 454.3bn yuan of new yuan loans in December, missing market expectations for a 550bn yuan rise. But for the year, 8.2tn yuan of loans were disbursed, exceeding an undisclosed target of 8tn yuan. Growth in alternative financing outside banks was even stronger as Chinese firms enjoy greater financing options.