China: A good start for exports, but headwinds loom – Nomura

China’s export growth in USD terms rebounded to 44.5% y-o-y in February from 11.2% in January, against market expectations of a slowdown (Consensus: 11.0%; Nomura: 8.0%), notes the research team at Nomura.

Key Quotes

“Import growth fell sharply to 6.3% y-o-y in February after rebounding strongly to 36.8% in January, weaker than market consensus but slightly stronger than our expectations (Consensus: 8.0%; Nomura: 3.0%), resulting in a trade surplus of USD33.74bn against market expectations of a deficit (Consensus: -USD5.7bn; Nomura: -USD5.4bn).”

“Strong export growth was partly due to the lunar new year effect (the holiday falling in mid-February this year but late January last year), which provided a low base for exports as exporters tend to front-load ahead of the holiday.”

“For January and February combined, the year-on-year growth of exports in USD terms rose to 24.4% from 9.7% in Q4 2017, while import growth was 21.7% from 12.5%, pointing to resilient external and domestic demand at the start of this year.”

“Looking ahead, we expect export growth to slow. RMB appreciation over 2017 should weigh on China’s near-term export outlook, while rising US trade protectionism adds uncertainty. Meanwhile, the likely moderation in fixed asset investment this year due to a cooling property market and a slightly contractionary fiscal policy does not bode well for China’s future import growth.”