China registered a surprise jump in foreign trade at the start of the year, partly because of strong demand from Russia, India and emerging markets in Africa and Latin America.
Exports from the world’s second largest economy rose by 7.1% in the January-to-February period, beating the 1.9% growth forecast by a Reuters poll of economists. The growth is also significantly higher than the 2.3% gains recorded in December.
China typically reports economic data for the first two months of the year together to avoid any distortions caused by the Lunar New Year holiday.
Imports also beat expectations, up 3.5% from a year ago, while the trade surplus reached $125.2 billion, about 7% higher than the same period last year.
China’s economy is battling a number of headwinds, including weak consumer and investor confidence, high youth unemployment and a long-running real estate crisis. The turnaround in trade — a year ago it was shrinking — is a rare bright spot in a gloomy picture.
Apart from the weak base effect, strong demand from emerging markets helped China’s trade surge at the start of the year. Shipments to Africa, Latin America, and India rose by 21%, 20.6%, and 12.8% respectively.
“While the strong export growth to India may reflect more its strong domestic economy, exports to Africa and LatAm could indicate growing trade ties between China and these emerging economies, amid a broad global geopolitical shift,” said Nomura analysts on Thursday.
India is the world’s fastest growing major economy, and its government expects it to expand by 7.6% this year.
Meanwhile, China’s exports to Russia increased 12.5%, representing a slowdown from the rapid growth seen last year. Moscow became China’s 10th-largest trading partner last year, with a record $240 billion worth of goods shipped between the two countries. At the start of 2024, it slipped to the 11th spot.
“China’s exports to Russia are unlikely to surge again in the near term to levels on par with those in 2023, due mainly to a high base and limited space for Chinese exporters to further expand their market shares in Russia,” said Nomura analysts on Thursday.
China’s shipments to the United States also increased, up 5% from a year earlier. But its exports to other traditional trading partners, such as the European Union, Japan, and Australia, registered declines.
Analysts are cautious about the outlook of the trade sector.
“At the current juncture, it is likely too soon to call for a revival in China’s trade sector,” said HSBC analysts on Thursday.
“We hold the view that trade uncertainty is likely to persist as global growth may still [be] soft amid high interest rates.”
Trade restrictions against China might also hamper growth later this year, said Lynn Song, chief economist for Greater China at ING.
In October, the European Commission launched an anti-subsidy investigation into Chinese electric vehicle imports into the bloc. The Biden administration has also been discussing raising tariffs on some Chinese goods, including EVs, the Wall Street Journal reported in December, citing anonymous sources.
Wang Wentao, the country’s commerce minister, said Wednesday at a press conference that foreign trade might face a severe situation this year amid weak international demand and trade protectionist measures globally.
