China exports rebound to five-month high in March

BEIJING: China’s exports rebounded in March but imports shrank for a fourth straight month and at a sharper pace, painting a mixed picture of the economy as trade talks with the United States reach their endgame.

Investors are hoping for signs of economic recovery in China to temper worries about slowing global growth, after the IMF this week downgraded its 2019 world outlook for the third time.

But veteran China watchers had said export gains may be due more to seasonal factors than any sudden turnaround in lacklustre global demand, as shipments were expected to jump after long holidays in February.

March exports rose 14.2 per cent from a year earlier, customs data showed on Friday, the strongest growth in five months. Economists polled by Reuters had expected a 7.3 per cent gain after February’s 20.8 per cent plunge.

Shipments picked up around 3 per cent month-on-month, suggesting some improvement in foreign demand, Julian Evans-Pritchard, senior China economist at Capital Economics, said in a note. But he said exports have yet to fully recover from a sharp slowdown late last year.

“With global growth set to remain weak in the coming quarters, a strong rebound in exports looks unlikely,” he said.

Adding to the worries, China’s imports fell more than expected, suggesting its domestic demand remains weak.

Imports fell 7.6 per cent from a year earlier, worse than analysts’ forecasts for a 1.3 per cent fall and widening from February’s 5.2 per cent drop.

That left the country with a trade surplus of $32.64 billion for the month, according to Reuters calculations based on the official data, much larger than forecasts of $7.05 billion.

In the first quarter, exports rose 1.4 per cent from a year earlier, while imports fell 4.8 per cent.

A customs spokesman said he expects mild growth in both exports and imports in the current quarter.

China also released lending data on Friday that, unlike trade, was unambiguously strong.

Chinese banks extended 1.69 trillion yuan ($251.59 billion) in net new yuan loans in March, up sharply from February and far more than expected, as policymakers push bankers to keep lending to struggling smaller companies, even at the risk of more bad loans.

Total bank lending in the first three months of 2019 hit a record quarterly tally of 5.81 trillion yuan, suggesting months of policy loosening by the central bank are starting to bear fruit.

Strong credit growth is likely to reinforce analysts’ views that the economy will stabilize later in the year after a rocky first half.

China factory surveys for March had provided some glimmers of hope that demand was improving at home and abroad, suggesting government stimulus measures may be starting to take hold.

While export orders remained sluggish, there were signs that a long spell of contraction was easing even as trade talks with the United States appeared to be making progress.

Washington and Beijing have largely agreed on a mechanism to police any trade agreement they reach, including establishing new “enforcement offices,” US Treasury Secretary Steven Mnuchin said on Wednesday.

However, a top White House official said the US side is “not satisfied yet” about all the issues standing in the way of a deal to end the US-China trade war. President Donald Trump said last week that an agreement could be reached in about four weeks.

But economists warn that even if a deal is reached, and both sides rescind tit-for-tat tariffs, Chinese exporters will still have to contend with weakening demand globally.

Reuters