China's export growth slows

China’s exports slowed in the year to date, official data showed on Monday, although growth remains ahead of expectations.

Exports rose by 16.3% year-on-year in January and February combined, compared to 20.9% in December. Analysts had been expecting export growth of between 14.0% and 15.0%.

In contrast, imports were ahead 15.5%, which was down on December, when they rose 19.5%, and below forecasts. Consensus had been for growth of around 17.0%.

The cumulative trade balance was $116.0bn in January and February, compared to $97.1bn in December. Forecasts had been for around $95.0bn.

January and February’s data has been combined for the first time to smooth out the effects of the Lunar New Year holiday, which can fall in either month.

Craig Botham, chief China+ economist at Pantheon Macroeconomics, said: "Growth rates will inevitably be lower than last year, given high base effects, but the surplus itself will also decline as consumption moves back to services and away from goods, and as competitors ramp up production and fight for their old market share."

TD Securities said: "Despite the likely dip in manufacturing activity due to the Lunar New Year holidays, the resilience in exports growth in the year-to-date should comfort the authorities as it appears their efforts to stabilised the economy are working. However, the softer imports growth may signal challenges in driving consumption growth amid China’s zero Covid strategy.

"We think the trade outlook remains clouded given rising geopolitical uncertainties and its impact on global growth, but the recent bounce in China’s February PMI data points to some stabilisation in domestic growth and overseas activity."

China’s growth target for the current year, announced on Saturday at the start of the National People’s Congress, is "around 5.5%". That compares to its target of "just above 6%" and actual growth of 8.1% in 2021.

Risks to growth in 2022 include shrinking demand, disrupted supply and weakening expectations, the annual government work report noted.

TD Securities argued that the 5.5% target, the lowest on record, "seems a bit ambitious, given the economic headwinds from the property market downturn and Covid lockdowns, which could spell more monetary policy easing".