China exports rebound but 2013 outlook remains murky
China's export growth rebounded surprisingly sharply to a seven-month high in December, a strong finish to the year after seven straight quarters of slowdown, but subdued global demand means that the spike may not herald an enduring recovery.
Uncertain trade prospects contrast with data that showed resilient local loan demand, further evidence that the world's second-largest economy rebounded towards 8 percent annual growth in the last quarter of 2012 on firming domestic demand.
That modest revival may reassure China's new leaders after a once-a-decade power transition at the top of the Communist Party in November, and follows a raft of pro-growth policy steps designed to support the economy - poised to post its slowest full-year growth figure since 1999.
Trade data released on Thursday showed the value of China's exports grew 14.1 percent last month compared with a year earlier, racing past forecasts of analysts polled by Reuters, who had expected annual growth of 4 percent.
Economists said the pick-up in exports growth from November's 2.9 percent rise was likely accentuated by lower comparison figures a year ago and exporters clearing year-end orders, factors that do not suggest a sustainable turnaround.
The customs office, which released Thursday's data, agreed.
"China trade still faces uncertainties in 2013," said Zheng Yusheng, a spokesperson for the customs office. "But we expect the trade situation will be relatively better compared to 2012."
The value of imports grew 6 percent on the year in December, also handily beating market forecasts for a 3 percent rise and quickening from zero growth in November, lifting the trade surplus a two-month high of $31.6 billion.
For 2012, China likely ran a current account surplus worth 3 percent of GDP, said Haibin Zhu, a JPMorgan economist. And the surplus should stay little changed at 2.9 percent of GDP this year as lackluster exports growth and sturdy imports demand keep the trade gap in check, he said.
MISSED TARGET
The year-end export surge was not enough to help China meet its 2012 growth targets for trade, underlining that exports have been the biggest drag on its economy for two years.
For 2012, China's exports grew 7.9 percent and imports were up 4.3 percent, both well under their 10 percent target.
"At the year-end, exporters tend to respond quickly to increases in external orders," said Ma Xiaoping, economist at HSBC in Beijing.
"If you look at the fundamentals of U.S. and Europe, this could be a temporary rise. In coming years, we expect export growth to remain at a low level, below 10 percent for 2013."
Still, financial markets were buoyed by the data.
Asian shares rose immediately on the figures and the yuan squeezed to record highs. The Australian dollar, sensitive to the strength of an economy that is the top buyer of Australian iron ore and other resources, popped higher.
The trade numbers followed credit and money supply data that pointed to resilient demand for loans in China.
Central bank figures showed China's M2 measure of money supply grew 13.8 percent in December from a year earlier, broadly in line with market expectations for a 14 percent rise.
Banks were shown lending 454.3 billion yuan of new yuan loans in December, missing market expectations for a 550 billion yuan rise. But for the year, 8.2 trillion yuan of loans were disbursed, exceeding an undisclosed target of 8 trillion yuan.
Growth in alternative financing outside banks was even stronger as Chinese firms enjoy greater financing options.
The central bank said China's total social financing aggregate, a broad measure of liquidity in the economy, jumped 23 percent from a year ago to 15.8 trillion yuan in 2012.
Corporate bond sales and trust loans led the way in alternative financing. Bond issuance leapt 65 percent from a year ago to 2.25 trillion yuan in 2012, while trust loans shot up 6.5 times to 1.29 trillion yuan this year.
"Robust system-wide credit growth lends support to our view that gross domestic product (GDP) growth could rebound to 7.8 percent year-on-year in the fourth quarter," said Ting Lu, an economist at Bank of America-Merrill Lynch.
A stabilizing economy should staunch any capital flight from China that threatens to dent its stash of foreign exchange reserves, the world's largest and which swelled to $3.31 trillion in December.
LISTLESS TRADE, BUT IMPROVING
China's economy has been stuck in its worst downturn in over three years. GDP growth plumbed a 3-1/2-year low of 7.4 percent between July and September, though analysts hope data next week will show growth quickened in the fourth quarter to 7.8 percent.
The gradual rebound would be led by strengthening domestic demand, economists say, with trade remaining an Achilles' heel.
Mired in its debt crisis and a recession, Europe has been the biggest headache for Chinese exporters. Bilateral trade with the European Union fell 3.7 percent in 2012 from a year ago even though export sales recovered in December.
On an annual basis, exports to the European Union climbed 1.9 percent last month in their first rise in seven months.
Shipments to the United States, which overtook Europe as the top buyer of Chinese goods this year, also improved in December to jump 9.6 percent, reversing from November's 2.6 percent drop.
Quarterly data too suggests trade may have bottomed between July and September. Annual growth in the value of exports and imports recovered from three-year lows in the fourth quarter.
"We're hitting a low base for the next several months, so that means the headline will be looking OK for December and for the first quarter," said Kevin Lai, an economist at Daiwa in Hong Kong. "The picture is still more mixed regionally."
Exports from South Korea unexpectedly fell last month, though the government blamed the poor performance on fewer working days.
China's trade sector supports an estimated 200 million jobs so a protracted exports cooldown worries the Communist Party, which stakes its one-party rule on promises of prosperity.
Net exports from China have subtracted from its GDP growth since March 2011, and had shaved 0.4 percentage points off GDP expansion in the third quarter.
China reports fourth quarter GDP numbers on January 18, with a benchmark Reuters poll predicting economic growth of 7.7 percent for all of 2012. That would mark the slowest full-year expansion since 1999 and a clear slowdown from the roughly 10 percent annual growth in China seen for most of the last 30 years.
(Additional reporting by Kevin Yao and Lucy Hornby; Editing by Alex Richardson)