China posts benign drop in exports
CHINA’S total trade fell in December, but far less than expected, with exports outperforming many of its regional peers after the country let the yuan depreciate sharply, highlighting fears of a currency war among Asia’s trade-reliant economies.
“The trade data support our view that, despite turmoil in Chinese financial markets, there has not been a major deterioration in its economy in recent months,” Daniel Martin, a senior Asia economist at Capital Economics, said.
Exports from the world’s largest trading nation fell 1.4 percent from a year earlier, data from the General Administration of Customs showed yesterday, much less than a Reuters poll forecast for an 8 percent drop and moderating from November’s 6.8 percent decline.
They also sharply outperformed exports from neighbouring countries such as Taiwan and South Korea, analysts noted, and came in the face of entrenched weakness in overseas demand.
December imports fell 7.6 percent, receding for the 14th straight month, but not as sharply as feared, possibly due to factories stocking up on crude oil, iron ore and other materials as global resource and commodity prices continued to fall.
Indeed, China’s crude oil imports hit a record high, while copper imports were the second highest on record.
Economists had forecast an 11.5 percent import slide, after an 8.7 percent drop in November. The combination produced a $60.09 billion (R1 trillion) trade surplus for December, compared with economists’ expectations of $53bn and November’s $54.1bn.
“Another large trade surplus provides a cushion for the People’s Bank of China in the face of soaring capital outflows,” Capital Economics’ Martin said.
While Asian stock markets cheered the China data surprise, economists and the customs department said exports would face further pressure in 2016 due to sluggish global demand.
“Companies tend to have to fulfil their contracts by the year end… and they’ll increase the amount they’re exporting in December,” customs spokesman Huang Songping said. “This doesn’t represent a trend (for 2016). In previous years we’ve seen exports improve in December. The situation in the first quarter still be relatively severe.”
Some economists also raised concerns that the betterthan-expected export data could be partly due to currency speculators using false or exaggerated trade invoices to get capital out of China and evade further declines in the yuan.
“As both imports and exports to Hong Kong broke with trends in a major way, it sug- gests the figures are likely driven by capital flight,” Oliver Barron of NSBO said. For the full-year, total trade was $3.96 trillion, down 8 percent from 2014 and China’s worst performance since the global financial crisis. The government had started the year with a target for 6 percent growth.
Yuan
China last week allowed the biggest fall in its yuan currency in five months and stock prices plunged, sparking concerns about the health of the world’s second-largest economy, though there has been little evidence so far that conditions have deteriorated sharply in recent weeks.
While risks abound, most economists believe the outlook for China’s economy has not changed, with most sticking to long-held predictions that it is facing a prolonged and gradual loss of momentum rather than a dramatic slowdown.
The central bank has allowed the yuan to weaken more than 5 percent against the dollar since August. – Reuters
Economists had forecast an 11.5% import slide after an 8.7% drop in November.