China reported robust exports for January, but assessing the nation’s true economic strength is no easy task. The Lunar New Year holidays that began at the end of January apparently created an export surgeA transient variation in the current and/or potential at a point in the circuit., and speculative investment funds have been flowing into the country under the guise of trade payments.
Exports grew 10.6% on the year last month, according to data released Wednesday by China’s customs agency, far surpassing the market’s projection of 0.1% growth. The better-then-expected figure helped propel Japan’s benchmark Nikkei Stock Average to the third straight day of advances on Wednesday.
Shipments to the European Union surged 18.8% and exports to the U.S. rose 10.7%, which is taken as a sign of recovery in those markets. Exports to Japan grew 10.6% in January after having shrunk for two consecutive years through 2013.
Still, some observers warn against taking the figures at face value. The Lunar New Year holidays ran from Jan. 31 through Feb. 6 this year, earlier than the previous year, resulting in a surgeA transient variation in the current and/or potential at a point in the circuit. in trade as companies rushed to get their goods shipped before the long break. That imports also grew 10% in January seems to support this argument.
Furthermore, lured by the rising yuan and high interest rates, speculators have been bringing investment funds into China under the pretense of export payments. Liu Li-Gang, chief economist for greater China at Australia & New Zealand Banking Group, says that considering that Taiwan and South Korea’s exports in January were sluggish, he suspects that exports are being inflated again.
Trade with Hong Kong, which is often used as a disguise to bring funds into the mainland, decreased 18% on the year in January. At first blush, the decline seems to suggest that the number is accurate. But exports to Hong Kong were still high considering that they had surged 90% on the year in January 2013 due to rampant fraud.
The purchasing managers’ index released by the Chinese government showed that new export orders were at 49.3 for January, below the boom-or-bust line of 50, suggesting lackluster overseas demand. Furthermore, Chinese export data tends to swing wildly in January and February due to the Lunar New Year. More data for this spring and afterward will be needed to get an accurate picture of the economy.
