China: Merchandise exports increase at a faster pace in April
Merchandise exports soared 32.3% year-on-year in April, following March’s 30.6% jump and markedly outpacing market expectations. The acceleration was likely due to a combination of fiscal stimulus in the U.S. and the worsening Covid-19 situation in some emerging markets such as India, with the latter supporting the competitiveness of Chinese exports and demand for protective equipment. Meanwhile, merchandise imports shot up 43.1% over the same month last year in April (March: +38.1% yoy), marking the best result since January 2011. However, April’s figure was distorted by the highly favorable base effect, with underlying import momentum easing somewhat.
As a result, the merchandise trade balance improved from the previous month, recording a USD 42.9 billion surplus in April (March 2021: USD 13.8 billion surplus; April 2020: USD 45.0 billion surplus). Lastly, the trend deteriorated, with the 12-month trailing merchandise trade balance recording a USD 629.6 billion surplus in April, compared to the USD 631.7 billion surplus in March.
Looking ahead, export growth will likely slow later this year as the base effect becomes less favorable and demand for pandemic-related goods eases, notwithstanding the global economic recovery.
On the potential policy implications of April’s reading, analysts at Nomura commented:
“Strong exports supports China’s recovery, and may also support Beijing’s tough stance on the property sector. Strong exports also give Beijing more scope to rein in local government debt. However, we believe Beijing will remain cautious in policy normalization, as the currently high rate of export growth may not sustain, especially considering the limited purchase power of EM economies relative to DM economies.”