China’s trade position worsened considerably in March, with exports in renminbi terms down 14.6% from a year ago in March, against a forecast rise of 8.2%. But perhaps the news wasn’t as shocking as the market reaction indicated.
Imports also fell in renminbi terms, down 12.3% from a year ago, versus predictions for an 11.3% fall.
That reversed completely the gains of the first two months of the year which had seen record trade surpluses of more than $US60.6 billion in February and a similar figure in January.
That resulted from big rises in exports (up 48% in February alone) and big falls in imports. Exports rose 15% year-on-year in January and February, while imports fell 20%.
But analysts had pointed to the timing of the Lunar New Year holidays in 2014 and this year as helping to explain the big surge in exports and the falls in imports (which was aided by the sharp fall in the price of many commodity exports, such as oil and gas, iron ore, coal and copper).
Analysts said we should get a clearer picture of China’s real trade performance in March – well it was issued yesterday and it wasn’t very encouraging and the trade data knocked markets across Asia in differing ways, forcing shares in China higher and those in Australia lower.
But it has to be remembered that China’s export and imports both fell in March 2014, surprisingly analysts at the time. The trade surplus was $US7.7 billion, just as the March surplus was small at around $US3.1 billion. And if you go back to March 2013, there was a surprise trade deficit as exports rose by less than expected and imports rose by more than expected.
The Aussie dollar fell around 1% to a low of 75.95c before rising to just over 76 USc, and then falling again. The Australian stockmarket, which had risen strongly in the first hour and was falling before the trade data was released in Beijing, ended lower and uncertain.
But the Chinese stockmarket was up more than 2.1% and the Hong Kong market was up more than 2.7% as the investment boom continues to surge.
But data from the Statistics Bureau and other sources suggest much of the fall in the value of imports was due to lower global prices – import volumes of iron ore, copper, oil and soybeans (for example) were all higher in March, but the value of those imports were lower.
So far as the fall in exports is concerned, government spokesmen in part blamed higher labour costs and the higher currency.
The monthly trade balance in March was Rmb18.16bn (around $US3 billion), the smallest in a 13 month string of surpluses and a long way from those record levels in January and February.
In February 2014 China recorded a trade deficit thanks to the impact of the New Year holiday pushing exports lower and a crack down on over invoicing by authorities to try and control money laundering.
In US dollar terms, exports fell 15%, against a 9% plus estimate from the market, while imports were down 12.7% against a 10% drop forecast by analysts. The fall in imports has been assisted by the plunge in the value of oil and iron ore in particular.
There was an element of a slump in March after front loading exports in February ahead of the Lunar new Year holiday.
For example exports to the US, EU and Japan fell by 8.0%, 19.1% and 24.8% in March respectively, down from of 48.5%, 44.1% and 23.6% in February.
Despite that possible part explanation, economists were quick to forecast another rate cut by the country’s central bank, or even spending package from the central government.
They now say there’s a chance the GDP figures for the first quarter, out tomorrow, could be under the ‘about 7%’ growth target from the central government for this year.
ANZ and Nomura both estimated first quarter GDP grew an annual 6.9% in new forecasts issued yesterday. Growth at that level would be a quarter century low.
Last month China’s central bank moved to help the property sector by loosening the deposit requirements for second homes.
The government last week cut taxes for the country’s suffering iron ore miners and there might be a number of other tax cuts to try and kick start export growth.
Looking at the first quarter, the Chinese government said that taking into account the March data, China’s foreign trade volume fell 6% year on year in the first quarter to 5.54 trillion yuan ($US902.3 billion).
Exports rose 4.9% from a year earlier, while imports shrank 17.3%.
