China: Exports soar at fastest pace in three years in February
March 8, 2018
Exports surged 44.5% annually in February, coming in well above both January’s 11.1% increase and the 8.5% rise that market analysts had expected. The surge, which represented the fastest expansion in three years, largely reflected distortions related to the Lunar New Year holidays, which occurred in Mid-February this year compared to end-January in 2017. Exports also benefited from strong global demand.
Meanwhile, in February, import growth slowed sizably from January’s 36.8% to 6.3%. February’s print missed the 9.7% growth that market analysts had expected.
The trade balance swung from a USD 11.0 billion deficit in February 2017 to a USD 33.7 surplus in February 2018 (January 2018: USD 20.3 billion surplus). The 12-month moving sum of the trade surplus rose from January’s USD 393 billion to USD 438 billion in February.
February’s surge in exports came on the back of rising trade frictions between the U.S. and China. In this regard, Tao Wang, Chief China Economist at UBS points out that:
“We expect US-China trade friction to rise, with the US imposing more trade restrictions/tariffs on more Chinese products, but we still think a broad-based restriction or tariffs on Chinese exports is unlikely. Should the US impose tariff on all Chinese exports, it will have a bigger negative economic impact on China than on the US. We estimated that a 10% tariff on all Chinese exports to the US would lead to a 2% drop in real Chinese export growth. Imposing tariff on a wide range of Chinese products will likely lead to higher prices in the US, and China will likely retaliate on US exports, including agricultural products.”
China Trade Balance Forecast
Our panelists forecast that exports will expand 5.9% in 2018 and imports will rise 7.2%, bringing the trade surplus to USD 425 billion. In 2019, exports will rise 5.3% and imports will increase 5.4%, pushing up the trade surplus to USD 446 billion.