China surprised the market with better than expected china export figures in December, lending support to stock prices and suggesting that the depreciation of the country’s currency is aiding the nation’s economy.
Dollar-denominated exports fell 1.4 per cent, much less than the market-expected drop and better than the 6.8 per cent fall in November. Exports rose 2.3 per cent last month in yuan terms, the General Administration of Customs said on Wednesday.
China Imports, meanwhile, fell 7.6 per cent in dollars last month.
That is the 14th consecutive month of decline, but outperformed expectations.
Analysts also noted that a marginal recovery in domestic demand as well as rises in the prices of imported metal and industrial products lifted imports.
Stocks prices were boosted by the better-than-expected data.
Hong Kong’s Hang Seng Index extended gains, up 2.63 per cent versus a gain of 1.9 prior to the data release.
The mainland’s benchmark Shanghai Composite Index extended gains to 1.18 per cent shortly after the release of yuan-denominated growth.
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“While this [export] improvement suggests that global goods trade picked up some momentum in the end of 2015, it also reflects the favourable impact of the depreciation of the yuan since early August 2015,” said Louis Kuijs, an analyst at Oxford Economics. “We estimate that since early August the trade weighted yuan depreciated 4.8 per cent.”
The People’s Bank of China launched a new yuan index targeting a basket of currencies in December to discourage exclusive focus on the link between the yuan and US dollar as China’s currency depreciated against the greenback.
Analysts said the weakness improved the yuan-denominated export data, which was converted from dollars.
Purchasing Manager Indices for manufacturing sectors in the Euro zone, Australia and Japan also rebounded in December, implying a possible recovery in external demand for China.
“China’s December trade data was reassuring, indicating that, despite the turmoil on the stock and FX markets, growth dynamics in the real economy are evolving more gradually and may actually be improving somewhat,” said Kuijs.
In the past, even when the yuan was stable against the dollar, it still strengthened against the greenback, but the central bank is intended to keep the renminbi stable against a basket of currencies, which would help exports, said Liu Dongliang, an economist at China Merchants Bank.
But analysts warned that the surprising trade data in a single month was far from a sign of a substantial rebound in trade in the coming months.
Huang Songping, a customs spokesman, said a survey on leading export index polled by the department fell once again in December, showing a lingering dim outlook for the first quarter.
Huang ruled out the possibility for a significant improvement in external demand and the global economy for 2016, which would add pressure on China’s exports.
The gloomy trade situation may press Beijing to give up a specific numerical growth target for trade this year.
Instead it might impose an implicit requirement such as export growth should stay higher than the global level, according to earlier media reports.
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The IMF revised down its forecast for the global economy to 3.6 per cent for 2016 from the previous 3.8 per cent, indicating it would still take time for a substantial recovery of the global economy and external demand.
Economists predict the “glorious era” of China’s exports has come to an end and it is unlikely to record robust double-digit growth while President Xi Jinping is trying to ramp up the economy trough resilient domestic consumption.
They also noted difficulties for exporters to cement enough orders.
They are confronted with rising labour and environmental protection costs, as well as a relatively stable yuan against a basket of currencies.