Beijing - China’s exports rebounded in March but imports shrank for a fourth straight month and at a sharper pace, painting a mixed picture of the economy as trade talks with the United States reach their endgame. Investors are hoping for more signs of economic recovery in China to temper worries about slowing global growth, after the IMF this week downgraded its 2019 world outlook for the third time. But veteran China watchers had said export gains may be due more to seasonal factors than any sudden turnaround in lacklustre global demand, as shipments were expected to jump after long holidays in February. March exports rose 14.2 percent from a year earlier, customs data showed on Friday, the strongest growth in five months.
Economists polled by Reuters had expected a 7.3 percent gain after February’s 20.8 percent plunge. But China’s imports fell more than expected, suggesting its domestic demand remains weak. Imports fell 7.6 percent from a year earlier, worse than analysts’ forecasts for a 1.3 percent fall and widening from February’s 5.2 percent drop. That left the country with a trade surplus of $32.64 billion for the month, according to Reuters calculations based on the official data, much larger than forecasts of $7.05 billion. In the first quarter, exports rose 1.4 percent from a year earlier, while imports fell 4.8 percent. A customs spokesman said he expects mild growth in both exports and imports in the current quarter.
China factory surveys for March had provided some glimmers of hope that demand was improving at home and abroad, suggesting government stimulus measures may be starting to take hold. While export orders remained sluggish, there were signs that a long spell of contraction was easing even as trade talks with the United States appeared to be making progress. Washington and Beijing have largely agreed on a mechanism to police any trade agreement they reach, including establishing new “enforcement offices,” U.S. Treasury Secretary Steven Mnuchin said on Wednesday. However, a top White House official said on Monday the U.S. side is “not satisfied yet” about all the issues standing in the way of a deal to end the U.S.-China trade war. President Donald Trump said last week that an agreement could be reached in about four weeks. But economists warn that even if a deal is reached, and both sides rescind tit-for-tat tariffs, Chinese exporters will still have to contend with weakening demand globally. The International Monetary Fund trimmed its 2019 global growth forecast this week to 3.3 percent, while slightly boosting its forecast for China to 6.3 percent, in part because the Sino-U.S. trade war did not escalate as much as expected. Chinese exporters will also likely have to scramble to win back lost market share. The trade dispute has prompted some U.S. firms to shift purchases of tariff-targeted products like furniture and refrigerators to countries such as Vietnam, South Korea, Taiwan and Mexico, according to a report by S&P Global Market Intelligence’s trade data firm Panjiva.
On imports, analysts said companies may not be restocking their inventories as much as usual due to concerns over the longer-term economic outlook. Slackening demand has sent corporate profits into a tailspin, which could curb the fresh investment that Beijing is counting on to fuel an economic revival. Policymakers have acknowledged the economy is under pressure as multi-year debt and pollution crackdown have deterred investment, while the U.S.-China trade war is hurting China’s exporters and their domestic supply chains.
In response, Beijing has announced more spending on roads, railways and ports, along with trillions of yuan of tax cuts to ease pressure on corporate balance sheets and avert a sharper economic slowdown. Investors are closely watching to see how long it will take those support measures to take hold. But analysts believe China will still need to loosen policy further in coming months to ensure a sustained economic turnaround. China’s economic growth is expected to cool to around 6.3 percent in the first quarter of the year and may not bottom out until later in the year, according to a Reuters poll. The economy grew 6.6 percent last year, a 28-year low.