China bids farewell to the luckiest year of its zodiac, the Dragon, and ushers in the Year of the Snake, associated with fear and bad tidings.
But its economy is starting the new year on an upswing, if last month’s trade data is any indication.
Exports grew a robust 25 per cent year-on-year in January and imports performed similarly well, up 28.8 per cent, according to data released Friday on the last working day before the country’s biggest holiday of the year. The country’s trade surplus is also up, 7.7 per cent year-on-year to $29.2-billion in January.
The numbers aren’t as strong as they appear; all economists warn there are seasonal distortions, with some even producing their own calculations taking into account the Chinese New Year holiday falling later this year than last. Inflation – though again distorted by the holiday season – was at a moderated 2 per cent, down from last month’s seven-month high, and deflation in the producer price index has also eased, falling 1.6 per cent, reflecting manufacturers’ rising demand for raw materials.
“Today’s strong trade data rebound reflects Chinese New Year distortions. External demand is likely stabilizing but a substantial sustained recovery is not yet in sight. We remain cautious on the external outlook but optimistic for China’s domestic recovery,” wrote Qu Hongbin and Sun Junwei at HSBC, which produced its own calculation of exports growth allowing for the five extra working days in January this year, and found exports’ real growth amounted to a more modest 12.4 per cent year-on-year.
Still, they found optimism in China’s increasing competitiveness in higher value-added production, as evidenced by a higher growth in machinery exports over more labour-intensive items, as well as by the location of the increased exports – mainly to destinations outside the United States, Europe and Japan.
“We believe China has the potential to continue expanding its share of global exports given that it has 20 per cent of the global labour force but still accounts for just 10 per cent of global exports. And urbanization is the key to unlocking this potential,” Mr. Qu and Ms. Sun wrote.
Even the state’s method of releasing this month’s data suggested its growing confidence; for the first time the trade numbers were also given in Chinese yuan, instead of U.S. dollars alone. China is trying to promote the yuan’s use as an international currency although it is not yet fully convertible outside Chinese borders; offshore trading centres are developing in Hong Kong, Singapore and London and this week Taiwan also received approval as a yuan clearing house.
“It does symbolize its growing importance and confidence,” said Alaistair Chan, economist at Moody’s Analytics, in a telephone interview.
“There are obvious caveats to all of this stuff, as there always is,” he said of the data. “I do think there is a gradual inflow of growth. I think the trade situation is improving and the economy is recovering…The investment cycle is picking up again.”