Asia Briefing: Mixed signals muddy the waters for forecasters

It's a challenge these days for the soothsayers to work out what is happening with the Chinese economy, as the data is sending out mixed signals. With analysts anticipating a downbeat picture of trade in the world's second-biggest economy, import growth hit a six-month high in January, raising a few eyebrows but doing much to calm fears that the economy could be heading for a prolonged period of difficulty.

The value of China's total exports climbed 10.6 per cent in January from a year earlier, the Customs Administration said last week, more than five times market forecasts for a 2 per cent rise. This caused suspicions among analysts, who have spent much of the past few months calling a significant slowdown in China.

They blamed false invoices because of the Lunar New Year holiday, when traders try to disguise capital inflows to escape various capital controls.

Chinese New Year is the world’s biggest annual holiday, when factories and offices close shop for weeks before and after the date as people wend their way back home.

China’s trade surplus rose to $31.9 billion (€23.29 billion), far above forecasts of $23.7 billion (€17.31 billion) and December’s $25.6 billion (€18.69 billion).

Despite the upbeat figures, these are not easy times for China’s exporters, which used to be the backbone of the country’s economic miracle but have had to deal with a steadily strengthening yuan, which has appreciated about 2.8 per cent against the dollar in the last year.

The value of imports rose 10 per cent from a year ago as China bought record volumes of iron ore, crude oil and copper.

A run of underwhelming economic data from China in recent weeks had steeled investors for another disappointment on Wednesday, as markets braced themselves for more signs that the world’s second-largest economy is losing momentum.

There have been widespread fears of a worst-than-expected slowdown in China, which prompted a major sell-off in global financial markets at the start of the year, especially in emerging markets.

A major problem is that the Chinese New Year holiday falls at different times in different years, sometimes taking place in January, other times in February, which leads to major distortions in trends. It could be late March before clear figures become available. However, Asian investors were generally pleased with the data, with a few caveats and stocks rose on the news.