BEIJING, March 10 (Reuters) - Year-on-year growth in Chinese exports and imports beat expectations in February, underlining the momentum behind the world's third-largest economy.
However, economists were wary of reading too much in the way of policy implications into the figures because of the timing of the Lunar New Year holiday and a low base of comparison in 2009.
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KEY POINTS:
-- Exports up 45.7 pct yr/yr (forecast up 38.7 pct)
-- Imports up 44.7 pct yr/yr (forecast up 39.7 pct)
-- Trade surplus $7.6 bln (forecast $8.0 bln
COMMENTARY:
BRIAN JACKSON, ECONOMIST WITH ROYAL BANK OF CANADA IN HONG KONG:
'Given the extreme weakness last year, we were always going to see a strong year-on-year increase in exports. But this number is quite impressive when you consider that there were five fewer working days in February this year because of the timing of new year holidays.
'The number points to solid underlying improvement in external demand, which should provide significant support to China's recovery in 2010. This should make policymakers in Beijing more comfortable with the idea of allowing currency appreciation to help deal with building price pressures.'
JING ULRICH, CHAIRMAN OF CHINA EQUITIES AND COMMODITIES AT J.P. MORGAN:
'After last year's severe export slump, net exports should make a modest positive contribution to Chinese GDP growth in 2010, after reducing growth by 3.9 percentage points in 2009. Signs of the export recovery are broadening and can be found in rising container shipping rates, reported labour shortages in coastal manufacturing hubs and in renewed political pressure for RMB appreciation.
'Elevated Chinese inventories lead us to expect a return to more normal monthly commodity import levels.'
TOM ORLIK, ECONOMIST WITH STONE & MCCARTHY RESEARCH ASSOCIATES IN BEIJING:
'The export recovery remains sluggish. Rapid growth in exports, with the year on year increase surging to 45.7 percent in February, from 21 percent in January, creates the illusion of a rapid recovery. But the volume of exports fell for a second month.
'February's disappointing data is a reminder that China's export sector cannot recover independent of a recovery in demand in major trade partners. With unemployment in the US and EU remaining stubbornly high, and government subsidies to consumption winding down, that recovery will necessarily be a slow process.'
LI HUIYONG, ECONOMIST AT SHENYIN AND WANGUO SECURITIES IN SHANGHAI:
'February trade figures are in line with our expectations, reflecting a trend of strong export and import recoveries, along with a narrowing trade surplus.
'We expect exports to rise about 22 percent for the full year and growth for the first half to be above 30 percent. The trade surplus this year will remain at around $190 billion, level with last year.
'The yuan is likely to appreciate between 3 to 5 percent this year, because of the continuous improvement in exports.'
ZHU JIANFANG, CHIEF MACRO ECONOMIST AT CITIC SECURITIES IN BEIJING:
'The strong trade figures are mainly due to the low base last year. They also show a continued recovery in China's external demand. Over the course of the year, exports growth will trend up, disrupted by fluctuations in some months.
'On currency policy, China will not move in the first quarter, pending clearer signs on economic growth, as data in the first two months are distorted by the Spring Festival.
'The country will possibly let yuan rise in the second quarter, mainly because of strong domestic growth, but also because of heavy global pressure.'
JUN MA, CHIEF ECONOMIST FOR GREATER CHINA WITH DEUTSCHE BANK IN HONG KONG:
'The year-on-year export number is indeed very strong. It is consistent with our broader expectation that the whole year is going to surprise massively on the upside compared with consensus. We have said that full-year export growth will be 30 percent. The market consensus is 15 percent only.
'Interestingly, the government is talking about 8 percent only. It looks like even our very bullish forecast will be exceeded given this momentum.'
'Obviously, it will translate into stronger pressure for exchange rate reform and it will also add inflationary pressure to the domestic economy, because when exports recover, prices tend to go up. It will reinforce the argument for further policy tightening.'
LU ZHENGWEI, CHIEF ECONOMIST AT INDUSTRIAL BANK IN SHANGHAI:
'We should not read too much into the massive increase in the headline year on year figures, because of the low comparison base and the distortion introduced by the variable timing of spring festival.
'February is the second consecutive month that exports experienced sequential month-on-month decline after calendar adjustments, implying that the recovery in exports is not as optimistic as many people have imagined.
'I think the sequential figures will cool down expectations of near-term yuan appreciation before trade fully recovers.'
LINKS:
For details, see the customs website at http://www.customs.gov.cn.
MARKET REACTION:
-- The Australian dollar edged up slightly in reaction to the figures.
-- The Shanghai stock market ended the morning down 0.54 percent, little changed from when the figures were released.
BACKGROUND:
-- Exports are pulling out of a deep dive induced by the global credit crunch, but Commerce Minister Chen Deming has said it will take 2-3 years for them to regain pre-crisis levels.
-- As a result, China will maintain policies to support exports, including tax rebates, in 2010, Chen said on March 6.
-- Despite international pressure to further reduce China's trade surplus, Beijing has reiterated that it will keep the yuan's exchange rate basically stable -- even though the central bank chief has said the 'special' policy of holding the currency down since July 2008 will end sooner or later.
(Reporting by Zhang Shengnan, Langi Chiang, Aileen Wang and Simon Rabinovitch; Editing by Alan Wheatley)
((alan.wheatley@thomsonreuters.com; +86 10 6627 1235; alan.wheatley.reuters.com@reuters.net)) Keywords: CHINA ECONOMY/TRADE (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
However, economists were wary of reading too much in the way of policy implications into the figures because of the timing of the Lunar New Year holiday and a low base of comparison in 2009.
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
KEY POINTS:
-- Exports up 45.7 pct yr/yr (forecast up 38.7 pct)
-- Imports up 44.7 pct yr/yr (forecast up 39.7 pct)
-- Trade surplus $7.6 bln (forecast $8.0 bln
COMMENTARY:
BRIAN JACKSON, ECONOMIST WITH ROYAL BANK OF CANADA IN HONG KONG:
'Given the extreme weakness last year, we were always going to see a strong year-on-year increase in exports. But this number is quite impressive when you consider that there were five fewer working days in February this year because of the timing of new year holidays.
'The number points to solid underlying improvement in external demand, which should provide significant support to China's recovery in 2010. This should make policymakers in Beijing more comfortable with the idea of allowing currency appreciation to help deal with building price pressures.'
JING ULRICH, CHAIRMAN OF CHINA EQUITIES AND COMMODITIES AT J.P. MORGAN:
'After last year's severe export slump, net exports should make a modest positive contribution to Chinese GDP growth in 2010, after reducing growth by 3.9 percentage points in 2009. Signs of the export recovery are broadening and can be found in rising container shipping rates, reported labour shortages in coastal manufacturing hubs and in renewed political pressure for RMB appreciation.
'Elevated Chinese inventories lead us to expect a return to more normal monthly commodity import levels.'
TOM ORLIK, ECONOMIST WITH STONE & MCCARTHY RESEARCH ASSOCIATES IN BEIJING:
'The export recovery remains sluggish. Rapid growth in exports, with the year on year increase surging to 45.7 percent in February, from 21 percent in January, creates the illusion of a rapid recovery. But the volume of exports fell for a second month.
'February's disappointing data is a reminder that China's export sector cannot recover independent of a recovery in demand in major trade partners. With unemployment in the US and EU remaining stubbornly high, and government subsidies to consumption winding down, that recovery will necessarily be a slow process.'
LI HUIYONG, ECONOMIST AT SHENYIN AND WANGUO SECURITIES IN SHANGHAI:
'February trade figures are in line with our expectations, reflecting a trend of strong export and import recoveries, along with a narrowing trade surplus.
'We expect exports to rise about 22 percent for the full year and growth for the first half to be above 30 percent. The trade surplus this year will remain at around $190 billion, level with last year.
'The yuan is likely to appreciate between 3 to 5 percent this year, because of the continuous improvement in exports.'
ZHU JIANFANG, CHIEF MACRO ECONOMIST AT CITIC SECURITIES IN BEIJING:
'The strong trade figures are mainly due to the low base last year. They also show a continued recovery in China's external demand. Over the course of the year, exports growth will trend up, disrupted by fluctuations in some months.
'On currency policy, China will not move in the first quarter, pending clearer signs on economic growth, as data in the first two months are distorted by the Spring Festival.
'The country will possibly let yuan rise in the second quarter, mainly because of strong domestic growth, but also because of heavy global pressure.'
JUN MA, CHIEF ECONOMIST FOR GREATER CHINA WITH DEUTSCHE BANK IN HONG KONG:
'The year-on-year export number is indeed very strong. It is consistent with our broader expectation that the whole year is going to surprise massively on the upside compared with consensus. We have said that full-year export growth will be 30 percent. The market consensus is 15 percent only.
'Interestingly, the government is talking about 8 percent only. It looks like even our very bullish forecast will be exceeded given this momentum.'
'Obviously, it will translate into stronger pressure for exchange rate reform and it will also add inflationary pressure to the domestic economy, because when exports recover, prices tend to go up. It will reinforce the argument for further policy tightening.'
LU ZHENGWEI, CHIEF ECONOMIST AT INDUSTRIAL BANK IN SHANGHAI:
'We should not read too much into the massive increase in the headline year on year figures, because of the low comparison base and the distortion introduced by the variable timing of spring festival.
'February is the second consecutive month that exports experienced sequential month-on-month decline after calendar adjustments, implying that the recovery in exports is not as optimistic as many people have imagined.
'I think the sequential figures will cool down expectations of near-term yuan appreciation before trade fully recovers.'
LINKS:
For details, see the customs website at http://www.customs.gov.cn.
MARKET REACTION:
-- The Australian dollar edged up slightly in reaction to the figures.
-- The Shanghai stock market ended the morning down 0.54 percent, little changed from when the figures were released.
BACKGROUND:
-- Exports are pulling out of a deep dive induced by the global credit crunch, but Commerce Minister Chen Deming has said it will take 2-3 years for them to regain pre-crisis levels.
-- As a result, China will maintain policies to support exports, including tax rebates, in 2010, Chen said on March 6.
-- Despite international pressure to further reduce China's trade surplus, Beijing has reiterated that it will keep the yuan's exchange rate basically stable -- even though the central bank chief has said the 'special' policy of holding the currency down since July 2008 will end sooner or later.
(Reporting by Zhang Shengnan, Langi Chiang, Aileen Wang and Simon Rabinovitch; Editing by Alan Wheatley)
((alan.wheatley@thomsonreuters.com; +86 10 6627 1235; alan.wheatley.reuters.com@reuters.net)) Keywords: CHINA ECONOMY/TRADE (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.