China: Trade data point to resilient growth momentum in January – Nomura

China’s export growth in CNY terms moderated to 6.0% y-o-y in January from 7.4% in December, beating market expectations (Consensus: 2.6%), notes the research team at Nomura.

Key Quotes

“Import growth in CNY terms rebounded to 30.2% y-o-y in January from 0.9% in December, which is also much stronger than the market expected (Consensus: 5.3%). The trade surplus narrowed to RMB135.8bn in January from RMB362.0bn in December.”

“Export growth in USD terms picked up to 11.1% y-o-y in January from 10.9% in December, stronger than both the market and our expectations (Consensus: 10.7%; Nomura: 5.0%). Import growth in USD terms rose to 36.9% y-o-y from 4.5% in December (Consensus: 10.6%; Nomura: 11.0%). The trade surplus in USD terms narrowed to USD20.3bn from USD54.7bn in December.”

“The calendar effect caused by the shifting lunar new year holiday from end-January last year to mid-February this year led to a distortion of year-on-year growth of both exports and imports in January. Exports tend to be frontloaded before the holiday, while imports tend to be postponed until after the holiday. Last year, as the lunar new year occurred at the end of January, some exports were frontloaded into January from February, while some imports were postponed until February from January. This year, however, the lunar new year occurs in mid-February, and the frontloading or postponement will both mostly happen in February. This created a low base for this January’s imports but a high base for exports.”

“However, even after taking into account the base effect distortions caused by the lunar new year shift, the January rebound in import growth was strong while export growth remained resilient. The softening of USD in January may have introduced an upward bias due to a valuation effect, but the strength of trade growth reflects more than this, showing that growth momentum in China remains resilient.”

“We expect export growth to moderate, not only on base effects but also due to previous RMB appreciation and rising Sino-US trade tensions. As for import growth, we expect it to slow as well, due to a gradual slowdown in domestic investment demand.”