Economic Highlights (China) - 11/04/2014

China: Exports Fell For Second Successive Month in March  

• China’s exports unexpectedly contracted for a second consecutive month in Mar, down 6.6% yoy after having fallen 18.1% in Feb and compared to +10.6% in Jan. This was worse than the consensus median expectation of a 4.8% yoy gain (OSK-DMG: +8.8%; consensus range: -17.0% to +12.5%). The fall was partly attributed to a sharp decline in exports to Hong Kong following inflated trade activities in the first four months of last year, which have distorted the base of comparison. Imports also fell by a considerable 11.3% yoy (consensus: +3.9%) after a 10% increase in Jan and Feb, partly reflecting cheaper prices of imported commodities. These resulted in a trade surplus of US$7.7 billion in Mar, a reversal from a trade deficit of US$23.0 billion in the prior month. In the first quarter, exports fell 3.4% yoy, weaker than an increase of 7.4% recorded in 4q13. Imports rose 1.6% yoy in 1q, slowing from 7.1% in the prior quarter. Trade surplus amounted to US$16.7 billion in 1q, down 59.7% yoy.    

• Despite the weak headline trade numbers, the latest data do provide some hope of a stabilisation of exports. Shipments picked up in most of the key markets, with exports to the EU rising 8.8% yoy compared to a drop of 14.4% in Feb and +4.7% in Jan-Feb. Exports to the US rose 1.2% yoy after falling 11.3% in the preceding month. Exports to Japan also reverted to a growth of 11.0% yoy in Mar, following an 11.0% drop in Feb and +4.4% in Jan-Feb. Likewise, exports to ASEAN inched up 10.3% yoy in Mar after a 15.0% slump in the previous month, partly helped by strong increases in exports to Vietnam, the Philippines and Indonesia. Exports to Singapore and Thailand, on the other hand, fell 8.5% and 5.9% yoy. Exports to South Korea and Russia also rebounded in Mar, growing by 9.6% and 7.0% yoy, respectively. Exceptions were shipments to Hong Kong, which fell 43.6% yoy, and exports to Taiwan, which dropped 23.5% yoy.  

• Meanwhile, China’s demand for some commodities also held up better than what the headline import figures suggest in Mar. Imports of copper, copper ore, soybean and iron ore continued to increase strongly, up 31.4%, 20.5%, 20.3% and 14.6% yoy in volume. Imports of crude oil, steel products and motor vehicles also rose 2.0%, 1.6% and 30% yoy. Demand for refined petroleum products and coal, however, fell 24.3% and 3.3% yoy.

• Overall, the Mar data point to some improvement in China’s exports despite headline figures painting a downbeat picture. Following the “normalisation” of trade statistics with Hong Kong since May last year after government’s interference, export growth to Hong Kong is expected to pick up in 2q, which in turn could help boost the overall export growth numbers. Meanwhile, there are positive signals in terms of export outlook in the coming months, as the manufacturing PMI’s new export orders showed an expansion in Mar again after declines in the past three months. The China Export Leading Indicator released by Chinese customs administration also indicated improving export prospects over the next 2-3 months. Still, the disappointing trade data for Mar suggest that the economy continues to face downside risks, including a lower-than-expected external demand and a weak domestic demand recovery.    

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