China's trade growth in January surprises analysts

Export and import jumped 25% and 28.8% respectively.

According to Barclays, China's January export and import growth surged to 25% y/y and 28.8% y/y respectively, stronger than consensus expectations and our more conservative forecasts (consensus: 17.5%, and 23.5%). 

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Besides the well-documented holiday distortions, possibly higher y/y export and import prices, and stronger demand could have contributed to the outcome. According to the Customs department, seasonally adjusted y/y growth rates were 12.4% for exports and 3.4% for imports.

While caution is certainly warranted and a better reading of trends will need to wait until after the February releases, the prints suggest that the risks to our 8% export growth and 7.9% GDP growth forecasts for 2013 are titled to the upside.

The trade surplus remained elevated at CNY29bn, compared with CNY31.6 in December, adding near-term appreciation pressure on the CNY as capital inflows continue. Our base case remains that the CNY will appreciate by 2% against the USD in 2013, assuming a moderate export recovery and stronger USD.

The holiday distortion effect – Chinese New Year on 10 February this year vs 23 January last year, ie, more official working days this January – will likely cause a slump in February y/y trade growth.

We look for flat to lower single digit export growth and a decline in imports. The next key activity indicator, February NBS manufacturing PMI, will be out on 1 March.

We expect it to show a seasonal decline on a m/m basis, falling below the 50 threshold, from 50.4 in January and 50.6 in December. Other January data such as IP, FAI and retail sales will be released on 9 March, after averaging of the January-February numbers.