China Exports Hold Up as Commodities, Base Effects Boost Imports

• China Exports Hold Up as Commodities, Base Effects Boost Imports

China’s overseas shipments held up despite trade tensions with the U.S., while import growth surged reflecting calendar effects and higher commodity prices.

Exports rose 11.1 percent in January in dollar terms from a year earlier while imports increased 36.9 percent, leaving a $20.34 billion trade surplus, the customs administration said Thursday. Economists said the data may be distorted by a later Lunar New Year holiday compared with last year.

External demand has remained intact amid a synchronized global expansion, helping to offset the yuan’s continued surge. Still, the world’s largest exporter faces uncertainty: Trade friction between the two biggest economies has ratcheted up recently, with China probing sorghum imports from the U.S. after the Trump administration slapped tariffs on solar panels and washers, which Beijing called a “misuse” of trade measures.

After climbing to a two-year high this week, the yuan sank the most since August 2015 after release of the trade data and a Reuters report on potential loosening of curbs on outbound flows. A narrower-than-expected trade surplus is seen as reducing demand for the currency.

“Export growth remained robust in January, indicating steady global demand momentum,” Louis Kuijs, head of Asia economics at Oxford Economics Ltd. in Hong Kong, wrote in a report. “While we expect the favorable external setting to continue to support China’s exports, rising U.S.-China trade friction remains a key risk.”

The trade surplus with the U.S. narrowed to $21.9 billion as exports rose 12.7 percent and imports surged 26.5 percent. That followed a U.S. Commerce Department report this week showing the trade gap in goods with the Asian power surged 8.1 percent last year.

“China imports more from the U.S. than their shipments to the U.S. As the trade tension of the two biggest nations intensifies, this figure is timely,” said Raymond Yeung, chief greater China economist for Australia & New Zealand Banking Group Ltd. in Hong Kong. “The Chinese side is expected to use this number to show their effort to narrow the trade gap.”

Friction will likely intensify this year, but a trade war is unlikely, according to UBS Group AG economist Wang Tao in Hong Kong. “Targeted tariffs and restrictions may hurt related stocks or sectors, but the macro impact on China’s exports or gross domestic product growth will be very small as a stronger global recovery helps to drive 2018 export growth,” she wrote in a recent report.

Calendar effects likely reduced activity in January 2017. The week-long Lunar New Year holiday began on Jan. 27 last year, but this year’s doesn’t start until Feb. 15.

“More working days would definitely have an impact,” Gai Xinzhe, an analyst at Bank of China’s research institute, referring to the holiday shift. “Though the yuan is getting much stronger against the dollar, its overall rates against other currencies are relatively stable, which could explain why exports data are better than expected. Trade data in the first two months are extremely volatile and it’s better to look at the first quarter data.”

Aluminum exports rose for a third month, with domestic supplies spilling overseas as the White House mulls possible trade tariffs.

Crude imports surged to a record. Shipments averaged about 9.61 million barrels a day in January, up about 20 percent from both a year ago and the previous month, according to Bloomberg calculations based on customs data.

“The trade outlook is pretty solid” on global growth, Cui Li, head of macro research at CCB International Holdings Ltd. in Hong Kong, said in a Bloomberg Television interview Thursday. “Because of the recovery in commodity prices, which is partly related to China’s supply-side reforms, that’s also encouraging businesses to spend, which helps the trade outlook.”