China exports jump, but market cautious on data

LOS ANGELES (MarketWatch) — Chinese trade data out Wednesday printed much stronger than expected, with a sharp gain for exports, but markets largely ignored the result, with some analysts expressing skepticism over the numbers’ accuracy.

China’s exports rose 10.6% in January compared to a year earlier, accelerating from a 4.3% advance the previous month, according to reported customs data.

The gain far exceeded forecasts for a 2% rise from a Reuters survey and for a 0.1% gain in a Wall Street Journal poll of economists.

Imports increased by 10%, picking up their pace from an 8.3% December advance and beating estimates for a 3% rise in both the Reuters and Wall Street Journal surveys.
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The resulting trade surplus totaled $31.86 billion. The Wall Street Journal had tipped a $27.1 billion surplus, widening from December’s $25.6 billion.

Despite the strong showing for China’s trade account, Chinese stock markets showed little immediate reaction to the data, which have been plagued by distortions and economists’ doubts in the past.

RBS chief China economist Louis Kuijs said his team had expected the results to be skewed to the downside, given the difference in the dates for the Lunar New Year this year versus in 2013, and due to the fact that last January’s data were distorted upward by reportedly rampant false invoicing.

But with the data instead surprising to the upside, Kuijs wrote that ”we are … left with a nagging feeling that perhaps issues such as over-invoicing have risen sharply in intensity early this year.”

Australia and New Zealand Bank’s China economist Zhou Hao also expressed doubts. “We think there were still many speculative trade activities disguised as exports, even though the government has taken measures” to stamp out the practice, Zhou was quoted as saying by CNBC’s Deirdre Wang Morris.

Previous distortions in China’s trade data have been variously attributed to poor data-gathering, exporters logging fake orders to help their tax bill, and capital inflows being disguised as exports.

Problems with invoicing in particular prompted customs officials to launch a crackdown on the practice last year, resulting in unexpectedly weak export numbers in May.

On the other hand, some economists accepted Wednesday’s data at face value, with TD Securities economist Annette Beacher saying the weak link in the data chain was actually China’s Purchasing Managers’ Index (PMI) tracking the manufacturing sector.

“The strong exports performance in the month was in sharp contrast to the weak exports PMI subcomponent, which had sunk to 49.3 in January, adding weight to our ongoing skepticism that these monthly PMIs actually add any value when it comes to predicting real activity,” she wrote in a note following the data.

“Exports to China’s major trading partners surged across the board, with exports to Europe overtaking the U.S. for the first time in two years,” Beacher said. “The stronger yuan over the past year or so doesn’t appear to be impacting trade flows.”

Likewise, Dow Jones Newswires quoted Mizuho economist Shen Jianguang as saying a 20% drop in shipments to Hong Kong suggested little sign of over-invoicing in January.

“Exports and consumption could be the bright spots for the Chinese economy this year,” the news service quoted Shen as saying.