China's exports surge at fastest pace in 3 years in February
China’s exports surged at the fastest pace in three years in February, suggesting both its economy and global growth remain resilient even as trade relations with the United States deteriorate after President Donald Trump announced planned US tariffs on steel and aluminum.
China’s February exports soared 44.5 percent from a year earlier, above analysts’ median forecast for a 13.6 percent increase and January’s 11.1 percent gain, official data showed yesterday.
Imports grew 6.3 percent, missing forecasts for 9.7 percent growth and down from a sharper-than-expected 36.9 percent jump in January.
Analysts caution that Chinese data early in the year can be heavily distorted by the timing of the Lunar New Year holiday, which fell in February this year but in January in 2017.
But combined January-February data also showed a dramatic acceleration in export growth, good news as China tries to crack down on risks in the financial system without sharply braking economic activity.
Exports rose 24.4 percent in January-February on-year, eclipsing 10.8 percent in December and up from single-digit growth in the same period last year. The gains came despite a much stronger yuan which is worrying the country’s exporters.
“The broad-based recovery in China’s major export markets could explain part of the reason why exports were still quite strong,” said Betty Wang, senior China economist at ANZ in Hong Kong.
But tension with the US is definitely a near-term concern and a near-term downside risk to China’s trade outlook, she added.
China’s goods surplus with the US, a sore spot in relations between the two nations, narrowed slightly last month but is higher so far this year than at the same point last year.
China’s trade surplus with the US was US$20.96 billion in February against US$21.89 billion in January.
Boosted by a global trade boom, China’s exports last year grew the fastest since 2013 and served as one of the key drivers behind the economy’s forecast-beating 6.9 percent expansion.
But tough US trade talk last year is now turning into action.
Trump was set to sign a proclamation today to impose the steel and aluminum tariffs, to counter imports.
The measures are set to go into effect in two weeks, but economists see little immediate impact on China.
China has already reduced steel exports to the US to a trickle in response to strong demand at home and US anti-dupming duties, and while aluminum shipments account for around 10 percent of its global exports of the metal, the number is still small compared with China’s total exports, said ING economist Iris Pang.
“All in all, the direct impact on China is minimal,” Pang said in a note published yesterday.
While China’s global steel exports have fallen by a third this year, tariffs on aluminum may be an easier sell for Trump, as China’s shipments rose over 35 percent in the first two months of the year.
Over time, however, any additional punitive US measures and retaliations by its major trading partners would cut global trade flows, disrupt international supply chains and drag on global growth.
At home, China’s domestic demand also appears solid, despite a cooling property market and rising borrowing costs that are expected to eventually rob the economy of some momentum.
While February import growth softened, it climbed 21.7 percent in the first two months of the year, compared with 4.5 percent in December. Imports of commodities again led the way, with steel mills replenishing inventories of iron ore ahead of the seasonal construction pick-up in spring.
China’s trade surplus widened to US$33.74 billion for February, beating forecasts for US$600 million and January’s US$20.35 billion. For January-February combined, the surplus rose 43.6 percent from the year earlier period to US$54.32 billion.
The strong trade performance suggests a possible upside surprise in China’s industrial output data next week and in economic growth for the first quarter as a whole. Analysts polled by Reuters earlier this year expected momentum to ease slightly to 6.6 percent this quarter from 6.8 percent late last year.
Premier Li Keqiang said on Monday that China aims to grow its economy by around 6.5 percent in 2018, flat from 2017.