EUR

China trade rebound points to healthy growth

By Simon Rabinovitch in Beijing




China shrugged off concerns over global economic gloom to end 2012 with a rebound in exports and imports that points to stronger growth at home and abroad.

However, some analysts warned the upturn would soon wane, although Beijing said it was cautiously optimistic the outlook would brighten further.

Robust demand from the US and Europe gave Chinese exporters a lift in December, but for the year as a whole China steadily lessened its reliance on exports to developed economies as the government made headway in its strategy to diversify towards emerging markets.

The fastest-growing destination for Chinese exports was southeast Asia, rising 20 per cent last year.

Exports rose 14.1 per cent in December from a year earlier, the fastest in seven months and well above November’s 2.9 per cent pace. Imports rose 6 per cent in December from a year earlier after flatlining in November. Both figures outstripped most forecasts.

China registered a $31.6bn trade surplus, up from $19.6bn in November. For 2012 as a whole, China had a trade surplus of $231bn, more than 50 per cent larger than a year earlier, breaking a run of three straight annual declines.

“This reconfirms the upward economic momentum in the fourth quarter,” said Shuang Ding, an economist with Citi. “The gap between exports and imports indicates that net exports are an important contributing factor to gross domestic product.”

The Chinese economy is expected to have rebounded towards 8 per cent growth in the fourth quarter of last year. That rebound would follow seven consecutive quarters of slowing growth. China’s full-year growth figure is set to be its lowest in more than a decade.

The wider trade surplus provides an important source of growth for the Chinese economy, which has suffered a contraction in external demand since the global financial crisis erupted in 2008. It also suggests that China’s key export markets, including the US and Europe, found a slightly more stable footing towards the end of 2012.

China exports to Europe rose 2.3 per cent year on year in December, a sharp turnround from an 18 per cent fall a month earlier. Exports to the US jumped to 10.3 per cent growth from a fall of 2.6 per cent in November.

Lan Shen, an economist with Standard Chartered said: “This reflects strong sales momentum during the year-end holiday season [in the US and Europe].”

Analysts say the more subdued import growth compared with exports indicates that Chinese groups are still working their way through large inventories, especially of raw materials. In spite of slowing growth, China reported highs on the year for crude oil, iron ore and copper imports.

The stronger than expected numbers buoyed investor sentiment, with the Shanghai Composite, China’s main stock index, jumping 0.5 per cent when the trade data were published. Other Asian stock markets also made gains.

The question now is whether the rebound in both exports and imports will be sustainable. Zheng Yusheng, a spokesman for the customs administration sounded an optimistic note.

“China still faces uncertainties in 2013,” he said. “But we expect the trade situation will be relatively better compared to 2012.”

But with the US facing rancorous debt-ceiling negotiations and Europe still mired in uncertainty, it would not take much to dent exports. “External demand remains a key risk to China’s growth outlook,” said Yu Song, an analyst with Goldman Sachs.

Within China, it is also unclear whether the government will step up growth-supportive measures, which would provide a boost for imports, or prioritise control of inflation.

Other data released on Thursday showed that new bank lending in December was Rmb454bn ($72.9bn), about Rmb100bn shy of forecasts, a shortfall that indicates the government could already be trying to rein in credit to prevent a jump in inflation. Non-bank credit issuance remained extremely strong but some analysts believe the government could soon tighten these financing channels.

“We expect the stance to tighten gradually in 2013, as regulators tighten controls on shadow banking activities and bond issuance,” said Zhang Zhiwei, an economist with Nomura.

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