China Trade: Key Insights from January-February Data as Exports Begin Strongly in 2024

China’s export sector has seen a notable uptick, with combined figures for January and February showing a 7.1% increase from the previous year, reaching US$528 billion. This surge marks the fastest rate of increase since May, with export volumes also hitting a record high.

Analysts at Nomura attribute the stronger-than-expected export growth to robust exports to emerging market trade partners such as Africa, Latin America, India, and Russia. This growth outpaced predictions by Chinese financial data provider Wind, which had forecasted a 3.9% increase, and exceeded the 2.3% rise recorded in December.

To smoothen the impact of the Lunar New Year holiday, which varies in timing between January and February each year, China combines trade figures for these two months. During this period, China’s imports also saw a notable increase of 3.5% from the previous year, compared to a 0.2% growth in December.

The upside in imports was primarily driven by an improvement in processing trade, according to analysts at Nomura. While import volumes rebounded, analysts at Capital Economics suggest a more gradual rise in the coming months, citing limited potential for an uptick in fuel imports.

China’s total trade surplus for the first two months of the year stood at US$125.1 billion, compared to US$103.8 billion during the same period last year. Despite resilient exports to Russia and growth in imports, analysts caution against expecting a repeat performance due to a high base and limited room for further market share expansion by Chinese exporters.

Exports to the Association of Southeast Asian Nations (ASEAN) rose by 6%, while exports to the European Union (EU) decreased by 1.3%. Lynn Song, chief economist for Greater China at ING, acknowledges the encouraging start to the year but notes the impact of a weak base effect from 2023 on trade readings.

Looking ahead, analysts at Nomura anticipate a notable drop in export growth in March, possibly even dipping into negative territory, while near-term growth momentum is expected to worsen further. Capital Economics highlights supportive fiscal plans indicated by the ongoing “two sessions,” suggesting increased infrastructure spending to bolster metals demand.

In light of these developments, China’s trade landscape remains dynamic, reflecting both domestic and global economic trends. As China navigates through potential challenges and opportunities in the coming months, stakeholders will closely monitor trade data for insights into the nation’s economic trajectory and its implications for global markets.