Those hoping for more evidence that the world’s second-largest economy is stabilizing should be in good spirits on Tuesday.
China’s trade data for December showed both exports and imports breezing past consensus to big beats, just a day ahead of the signing ceremony for the interim Sino-US trade accord in Washington.
Exports rose 7.6% YoY in dollar terms last month, well ahead of the 2.9% the market was looking for, and near the top-end of the range. This is especially welcome news coming as it does after exports unexpectedly shrank in November.
Imports, meanwhile, surged 16.3% against estimates for a 9.6% rise. In November, imports snapped a six-month stretch in contraction territory and the December figure appears to bode well for domestic demand, which had been flagging.
The trade surplus was $46.79 billion. For the full year, exports rose 0.5% and imports fell 2.8%, both in dollar terms. The January through December trade surplus with the US was $295.8 billion, down from $323.32 billion in 2018.
Market participants are desperate for validation that the economic tide is turning after piling into reflation-oriented trades in the fourth quarter. Some of the recent data out of the US has been underwhelming, and Germany is still mired in a deep manufacturing slump.
In China, on the other hand, things have been looking up. The latest PMI data showed the factory sector expanding for a second month and industrial profits rebounded sharply in November after plunging the most on record. We’ll get December activity data and GDP later this week. Beats there could help reinforce the notion that things are set to inflect. November’s activity data was solid with both industrial production and retail sales beating. The market would love an encore.
As far as the yuan is concerned, it’s possible all the good news is priced in – at least in the near term. The Trump administration’s decision to lift the manipulator label from Beijing cemented a strong rally which finds the yuan sitting at the best levels against the dollar since August.