China's jump in exports points to stronger recovery

Chinese exports rose much faster than expected in December, prompting some analysts to say the recovery is stronger than thought

Request a PDF

Exports jumped by 14.1% in December from November’s 2.9% increase and against expectations of around 5%, with the data sparking a rally in Asian shares and risk assets.

Imports also increased more than expectations, rising 6% in the last month of 2012 compared with estimates of 3.5% growth.

For the whole of last year, Chinese exports rose by 8.3% and imports by 5.3%, contributing to an increase in the country’s trade surplus to $233 billion from $158 billion in 2011.

“The much stronger than expected export growth in December highlights that the Chinese economy was likely rebounding more strongly than expected heading into 2013,” Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ, said.

The US became China’s top export destination last year, replacing the European Union because of the ongoing crisis in the eurozone.

The recovery in the US and the fact that Europe is “doing slightly better” were factors behind the jump in exports, Wei Yao, China economist at Societe Generale, told Emerging Markets.

But “the most important thing is that emerging markets seem to be doing very well,” she added, pointing out that the ASEAN economies and Taiwan saw a jump of 30% in their imports from China in the fourth quarter. Demand from Africa and the Middle East was also strong.

Trade data has become “increasingly volatile” so it is better to look at the three-month picture, Yao said.

MODERATE INCREASE

In the fourth quarter, China’s export growth rebounded to 9.4% while imports increased by 2.7% from 4.5% and 1.6% in the third quarter.

 More from Emergingmarkets.org
 Emerging markets top risk this year: consultants
 Investors 'strongly bullish' on EM
 Countries with fastest-rising salaries this year
“We think that this trend may be sustained for one or two quarters. We talk about moderate increment, nothing spectacular,” said Yao.

She expects export growth in the coming quarters to be “in the low teens” and unlikely to rise above that because of the same risks the global economy has faced for the past two years.

“At the moment we still look to see how much impact the US fiscal cliff will have on the data,” she said.

“In Europe, risk has receded but it can come back.”

At the beginning of the year, US lawmakers approved a bill that extended the tax cuts made in 2001 by President George W. Bush for individuals earning below $400,000 a year or households earning below $450,000 and extended unemployment insurance benefits for 2 million people for one year.

The bill postponed by 2 months the start of $1.2 trillion worth of automatic spending cuts over 10 years and left the issue of raising the debt ceiling unresolved.

The debate between President Barack Obama and the Republican Congress on raising the US $16.4 trillion debt ceiling will affect confidence among consumers and investors, putting the recovery – and China’s rebound in exports – in jeopardy, Yao warned.