China Trade Data Shows Growth Picking Up

China’s trade data for March, “points to healthy growth in import volumes and adds to growing evidence that the extreme gloom of a few weeks ago about the state of the domestic economy was misplaced.” That’s according to a report from Capital Economics on the recent slug of economic data released by China this week.

As the quote above implies, the report — a copy of which has been reviewed by ValueWalk — presents an optimistic view of China’s recent data releases and concludes that economic conditions within China are improving.

China trade data: A positive outlook

Chinese exports rose 11.5% year-on-year in dollar terms last month, following a 25.4% contraction in exports for February. Capital Economics was forecasting export growth of 20%, and the Bloomberg median estimate was 10%.

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That being said, as Capital Economics points out, exports are generally expected to rebound in March following the Chinese New Year shutdown. Last year the New Year shutdown extended into early March but this year the shutdown was confined to February.

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China trade data

However, for the first quarter as a whole, the value of Chinese exports has continued to fall although, as Capital Economics points out, there are tentative signs that the pace of decline is bottoming out.

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It should also be noted that the value of exports has been dragged down by falls in commodity prices. While China is a net commodity importer, the value of its commodity exports are still substantial, and export volumes are holding up better than values.

Import figures are also being affected by commodity prices. During March, the dollar value of imports fell 7.6% year-on-year, a smaller decline than the 13.8% drop reported for February. However, as shown in the chart below import volumes of most major commodities are rising at a fairly rapid pace.

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China trade data

Granted, some of the increase can be traced to stockpiling and arbitrage of onshore/offshore price differentials. Nevertheless, the data suggests that “buyers are sanguine about the economic outlook.” Capital Economics estimates that the volume of all imports to China increased by 5.8% year-on-year throughout the first quarter.

And after considering all of the above Capital Economics estimates that China’s trade surplus is around $29.9 billion for March. Plugging this figure into forecasts shows a monthly estimated net capital outflow of $45 billion, down from the original estimate of $60 billion. Monthly outflows had exceeded $100 billion at the beginning of 2016, so if these figures are anything to go by China is heading in the right direction.

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But as is always the case with any figures that are published by China’s government, this week’s import/export figures should be viewed with a degree of scepticism. Policymakers are under pressure to shown that the country’s economy is not as weak as many believe so it may be in their interest to adjust the figures accordingly.