China trade beats expectations in April
But data fails end scepticism that financial manoeuvring is masking demand weakness
China’s exports rose 14.7 per cent in April, while imports grew 16.8 per cent, leaving the country with a trade surplus of $18.16 billion for April. Photograph: China Daily/Reuters
China’s exports and imports grew more than expected in April, offering the possibility of a better outlook for the world’s second-largest economy, but the figures failed to put an end to scepticism that financial manoeuvring by exporters and speculative capital inflows are masking weakness in real demand.
China’s exports rose 14.7 per cent in April, while imports grew 16.8 per cent, leaving the country with a trade surplus of $18.16 billion for the month, the Customs Administration said today.
That compared with market expectations for a 10.3 per cent rise in exports, a 13.9 per cent increase in imports and a trade surplus of $15.1 billion.
From a month earlier, exports edged up 2.7 per cent while imports fell 7.7 per cent.
Chinese export data in recent months has seemed to signal to a gradual revival of external demand, though some analysts suspect exporters may have overstated their business to sneak funds into the country and avoid capital restrictions.
“I have no strong conviction whether the data reflects reality. We’ll focus on next Monday’s activities data,” said Zhiwei Zhang, chief China economist at Nomura in Hong Kong.
“China’s SAFE recently launched new rules to crack down against capital inflows disguised as trade payments. I’m suspicious about the trade data,” Mr Zhang said, referring to the State Administration of Foreign Exchange.
The regulator released new rules on Sunday to crack down on hot money inflows disguised as trade payments.
A Reuters estimate of hot money flows based on official data indicates that $181 billion in speculative cash entered China in the first quarter, fuelled in part by loose monetary policy from the United States and Europe.
Adding to the scepticism over the trade data, a pair of PMI surveys last week showed growth in China’s vast factory sector eased in April as new export orders shrank. However, in the trade figures, manufacturers were among the sectors reporting increases in exports in the month.
In addition, the customs figures showed a 57 per cent jump in exports to Hong Kong and a 250 per cent rise in exports to bonded areas, adding weight to theories that goods are not being exported to final destinations.
“In 1Q13, China’s export data were heavily distorted due to over-reporting by exporters who might bring in hot money through fake exports and arbitrage the differential between CNH/USD and CNY/USD by moving goods in and out of HK,” Bank of America Merrill Lynch economist Ting Lu wrote in a report on today’s data, referring to offshore and onshore yuan currency rates.
“The evidence includes the abnormally strong exports to bonded areas and Hong Kong.”
Spot onshore yuan hit a fresh record high of 6.1424 per dollar today, on strong corporate demand and expectations of further policy reforms to liberalise the exchange rate.
The latest export figures also don’t chime with those from other regional economies. South Korea and Taiwan posted weaker-than-expected exports for April, showing the fragility of global demand.
Taiwan’s government said on today it will cut this year’s economic growth forecast due to sluggish export data.
Although the United States posted firm jobs numbers for April, they followed a series of weak data, while the recession-hit euro zone has record unemployment.
However, there were positives in the data. While China’s exports to the United States fell 0.1 per cent in April and those to the EU fell 6.4 per cent, the rates of decline were much less than March’s declines of 6.5 per cent and 14 per cent, respectively.
Exports to ASEAN countries rose 37.3 per cent and those to South Korea were up 7.2 per cent.
“I think the export growth must be supported to some extent by the real overseas demand, adding to signs of gradual revival in the world economy,” said Shen Lan, economist at Standard Chartered in Shanghai.
“With Beijing tightening checks on hot money inflows disguised as trade transactions, I think the export figures in the coming months will more reflect the real underlying momentum of external demand.”
China’s economy unexpectedly stumbled in the first quarter, growing 7.7 per cent from a year earlier versus a rise of 7.9 per cent in the previous three months.
A Reuters poll in April had forecast second-quarter annual growth of 8 per cent and most economists expect a steady and gentle economic recovery this year.