Although the data will invariably be derided as unreliable due to holiday effects and lingering distortions tied to the tariffs, China released a set of ostensibly upbeat trade data on Thursday.
Exports rose 9.1% in January, markedly better than the 3.3% drop consensus was expecting. Imports fell just 1.5% versus an estimated 10.2% drop.
As usual, the range of estimates was comically wide, but generally speaking, this was far better than anticipated and it comes as a relief following December’s trade data which was underwhelming, to say the least.
In addition to any seasonal and/or tariff-related distortions, one might reasonably ask if the data might have been “influenced” in any way by the fact that it was released just as Lighthizer and Mnuchin meet with Chinese Vice Premier Liu He. You don’t have to be a conspiracy theorist or an incorrigible China data skeptic to suggest that Beijing might have wanted to project some resilience with the US delegation in town. Then again, if there was an effort to massage the data in the interest of influencing the trade discussions, it certainly didn’t show up in the bilateral numbers, which showed China’s imports from the US crashing nearly 39% YoY.
As a reminder, Xi himself will reportedly meet Lighthizer and Mnuchin on Friday, a kind of goodwill gesture to Trump.
Obviously, the market is watching closely for any signs that China’s efforts to shield the economy from the effects of the trade war and bolster domestic demand are bearing fruit.
Most analysts expect more easing (both on the fiscal and monetary fronts) in the months ahead and for her part, Barclays Jian Chang (the only analyst to correctly nail the PBoC in 2014) is looking for a benchmark cut sooner rather than later.
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There have been some tentative signs of stabilization lately. For instance, December’s credit data suggested easing was starting to work its way through to the real economy, even as the transmission channel remains “clogged.” Additionally, China’s official manufacturing PMI ticked higher for January, although it did print in contraction territory again. Recall that the Caixin survey subsequently threw a bit of cold water on things, though.
In any event, the January trade data will likely be good enough to support the “things are stabilizing at a low level” narrative. As a reminder, that story is basically the glass-half-full take at a time when the Chinese economy is growing at the slowest annual pace in more than a quarter century.
Again, critics and naysayers will immediately point to front-loading ahead of the holiday on the way to casting doubt on the data. Be that as it may, all anyone was looking for on Thursday was a set of numbers good enough to help allay fears that the Chinese economy is falling off a cliff, and January’s import/export beats will work in that regard.
Ultimately, it’s all about the trade talks at this juncture. After all, if you believe Sino-US tensions are in large part responsible for China’s ongoing economic deceleration, then you can partially write off weakness in the data if you believe the Q4 market turmoil on Wall Street was enough to make Trump realize there’s a lot to lose and not much more to gain from pushing the envelope any further with Xi.
Good analysis.
I mean, isn’t it possible that the data can be derided because it comes from a Party-State that derives a large part of its legitimacy from upholding Chinese nationalism and promising economic growth at the cost of political freedom and democratic elections – and therefore cannot be seen as being weak or vulnerable to U.S. economic and geopolitical pressure?
The Chinese government can say anything it pleases, right? I mean, what is the verification process? Wattage seen from space? National and regional political careers are made by hitting pre-assigned growth targets, and there is never any revision of data or transparency.
Being off this much makes the estimates look like they were made using a dartboard and a blindfold.
They run their government the way we run our wars.
China is not paying the tariffs anymore than Mexico is paying for the wall. Given that a lot of their goods are cheap, disposable crap, I’m not entirely sure they are going to feel the hurt in a trade war. Americans are going to keep buying the majority of their goods from China. It’s not like we have much of an alternative. This is also going on at a time when unemployment in the US is low, so there are wages to buy their junk, even if it is slightly higher.
Trump is going to have to hurt Americans a lot more before the Chinese feel the pinch.