China released its exports and imports trade data on Thursday, witnessing growth and exceed the forecasts in the period of January-February, suggesting a return of global demand.
The increase in global demand for goods is a turning point and an encouraging news for the already frailing Chinese economy, as it tries to shove up the struggling economy.
The improved exports data from China, along with positive signs South Korea, Taiwan, and Germany saw their exports exceeding the top forecasts during the first two months of the year 2024, and Asian economies benefiting from an increase in demand for semiconductors.
Exports from China, the world’s second largest economy remained 7.1% higher in the first two months of 2024, compared with the previous year, beating a Reuters poll that expected an increase of just 1.9%. Meanwhile imports also increased by 3.5%, compared with expectations of 1.5%.
Xu Tianchen, a senior economist at the Economist Intelligence Unit said that, “The better-than-forecast data echoes a recovery in global trade driven by the electronics sector, but also benefits from a low base effect, as export growth in January-February 2023 was -6.8%.”
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Other Concerns
As exports from China exceed the forecasts and global demand returns back, it echoes an encouraging sign for the Chinese economy in particular, and global economy in general.
Chinese Premier Li Qiang announced an economic growth target for the year 2024 on Tuesday, with a target set around 5%, almost the same as last year. The government promised to transform the development model of the country, which is heavily reliant on industrial manufacturing and exports of finished goods.
China has been struggling with a lower than expected growth for more than a year now, due to reduced consumer spending and an engulfed property crisis. Coupled with huge debts of local government and investors divesting from the country, created bigger problems for the policy makers.
However, these are just early signs of positivity and it will require much more of an effort and confidence before investors can actually be convinced that the growth engine has started again.
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Structural Reforms
Market didn’t immediately react to the trade data, with Hong Kong’s Hang Seng Index dropping 0.47%, China blue chip CSI300 index falling by 0.32%.
China’s trade surplus grew to $125.16 billion, significantly larger compared to December’s $75.3 billion and estimated $103.7 billion. Commodities data that was also released on the same day showed that import of crude oil by China increased by 5.1% in the first two months, as refineries ramped up their purchases to meet fuel sales on Lunar holidays.
In addition to this, global monetary easing may also give some relief to the Chinese economy and give hopes of increased export activity although economic conditions in various developed regions are in gloom.
With both Britain and Japan slipping into recession in the second half of the year and the eurozone economy getting stalled, it has further dampened the hopes of global economic recovery in the near future.
Many economists are concerned that China might also follow Japanese style stagnation later in the decade unless policy makers take stringent measures to realign the economy towards household consumption and market orientation.
