Increases for China March Imports, Exports Beat Expectations

(Beijing) – China’s imports and exports expanded more rapidly in March than analysts expected, adding to signs that the growth momentum posted in the fourth quarter of 2016 for the world’s second-largest economy continued in the January-February period.

But government officials and analysts said the year-on-year rebound in March for total trade, reflected in official figures released Thursday, may ease in the April-June period.

Import and export growth could slow against the backdrop of protectionist sentiment among some of China's trade partners, stabilizing global commodity prices, and a possible cooling off for China’s property market, which would impact domestic demand.

March exports rose 16.4% from a year ago to $180.6 billion, according to China's General Administration of Customs, far higher than the median increase of 3% forecast by 12 economists polled by Caixin.

Imports grew at an even stronger rate of 20.3% to $156.7 billion, according to the customs agency, well ahead of the median 17.4% gain predicted by the surveyed economists.

The nation's trade surplus came in at $23.9 billion for March, down from $29.9 billion a year ago, the customs agency said.

The latest trade figures provided further evidence that China's growth momentum is continuing. The first-quarter GDP growth rate is due to be released Monday. The fourth-quarter expansion of 6.8% marked the first acceleration in eight quarters.

The official manufacturing purchasing managers’ index hit 51.8 in March, the highest reading since April 2012 and within a range signaling overall business expansion for the nation's manufacturers.

First-quarter exports rose 8.2% year-on-year and imports surged 24%, according to the customs agency.

Customs agency spokesman Huang Songping attributed the robust trade performance in the first quarter to improved demand for Chinese goods in developed and less-developed countries where economies are recovering, as well as resilient Chinese demand for foreign goods.

Higher prices for commodities such as iron ore and soy beans imported by China also contributed to the improved trade picture, Huang said. Commodity import prices rose an average 13.5%.

But Huang said import and export growth would “very likely slow” in the second quarter.

“China’s foreign trade still faces multiple, unstable factors and uncertainties this year,” he told reporters at a press conference.

Headwinds that may affect Chinese exports include Britain’s ongoing Brexit transition, this year’s elections in some European countries, and the rise of anti-globalization and protectionist sentiments, Huang said. Meanwhile, he said, imports could be affected by falling prices for commodities including crude oil.

“The situation in the first quarter cannot be taken as a guarantee for the full-year trend,” Huang said. “Whether the recovery in foreign trade can be sustained will depend on many factors.”

Imports of many commodities climbed in terms of volume and value in the first three months of the year from the same period in 2016, customs data showed. Prices rose more rapidly than volume levels.

For example, iron ore imports rose 12.2% by volume and 91.3% in value, while crude oil imports were up 15% by volume and 79% in value.

“Import growth may pull back as the base for commodity imports rises,” according to a report by analysts with China International Capital Corp. Ltd., an investment bank.

Commodity price growth has slowed recently, the report noted, after rebounding from a low posted in the first quarter of 2016.

Huang said China imported 2.68 million tons of coal from North Korea in the first quarter, down 51.6% year-on-year, as a result of a ban imposed by Beijing in February on purchases after Pyongyang tested an intermediate-range ballistic missile.

China's domestic property market may also affect trade in coming months, said Louis Kuijs, an economist at the research firm Oxford Economics.

Many Chinese local governments have imposed tightening measures since the end of September such as higher down payment requirements for real estate buyers in order to control speculation and, thus, injected more volatility into import prospects.

“We think import growth will ease later in 2017 on slower real estate activity momentum and a less accommodative macro policy in China,” he wrote in a research note.

Kuijs expects exports to hold up in coming months thanks to improving global demand “provided the risks of significant protectionist moves do not materialize.” He said recent China-U.S. trade tension had softened since Presidents Donald Trump and Xi Jinping met recently in Florida.

This report has been corrected to state that the economic growth rate in the fourth quarter of 2016 was the first acceleration in eight quarters, not 10, due to the latest government revision of historical data.

Contact reporter Fran Wang (fangwang@caixin.com)