China trade: export growth slowdown in January-February ‘alarming’ despite beating expectations

• Exports grew by 16.3 per cent in combined figures for January and February compared to a year earlier
• Imports grew by 15.5 per cent in combined figures for January and February from a year earlier

China’s export growth slowed in January and February, combined data released on Monday showed, although it was better than expected.

Exports grew by 16.3 per cent in January and February from a year earlier to US$544.7 billion, down from December’s growth of 29.9 per cent.

It was above the median result of a survey of analysts conducted by Bloomberg, which predicted 15.7 per cent growth.

Data for January and February are combined to smooth out the impact of the Lunar New Year holiday, which falls at different times during the two months in different years. This year, the week-long holiday started on January 31.

Imports, meanwhile, grew by 15.5 per cent in January and February from a year earlier to US$428.75 billion, down from December’s growth of 19.5 per cent.

It was also below the Bloomberg survey, which had predicted 16.8 per cent growth.
Overall, China’s total trade surplus stood at US$115.95 billion in January and February combined.

China’s economy had a robust start in 2021 driven by strong growth in exports, but began to lose steam in the second half of the year amid a series of regulatory clampdowns in real estate, technology and education.

On Saturday, China set its lowest annual gross domestic product target of “around 5.5 per cent”, according to the government work report delivered by Premier Li Keqiang.

“Export growth slowed in the first two months this year. This is alarming as exports was a main driver for economic growth last year when investment and consumption were both muted. With the export growth slowing down, the pressure on the government rises further to loosen policies to achieve the ambitious growth target of 5.5 per cent,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

“I think that slower export growth is well expected by the market, hence the doubt in the market if the economy can turn around in 2022. With the Ukraine crisis imposing downside risk to global demand, China will have to rely more on domestic demand in 2022. Now the pressure is on the fiscal policy to deliver.”

With the phase-one trade deal, which expired at the end of December, being described as a “historic failure”, China’s imports from the United States rose by 8.3 per cent from a year earlier to US$31.77 billion in January and February.

Exports, meanwhile, increased by 13.8 per cent to US$91.54 billion.

In January and February, China’s trade surplus with the US was up by 16.6 per cent to US$59.771 billion from US$51.262 billion over the same period last year.

The 10 countries of the Association of Southeast Asian Nations (Asean) continued to be China’s largest trade partner, followed by the European Union and the US.

China’s exports to the 10 Asean countries rose by 13.3 per cent compared with a year earlier to US$76.32 billion in January and February, while imports rose by 12.8 per cent to US$60.27 billion.

“Trade volumes remained strong last month, but are likely to soften over the coming quarters as China’s import-intensive construction sector cools further and rising inflation dampens demand for consumer goods in developed markets,” said Julian Evans-Pritchard, senior China economist at Capital Economics.

“Soaring commodity prices also mean that China’s import bill will continue to grow even as demand softens, weighing on net trade.”

Authors: Andrew Mullen, Amanda Lee, SCMP