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China’s Trade Data Surpasses Expectations, Offering Hope for Global Economic Recovery

China’s export and import growth in the January-February period exceeded expectations, signaling a positive shift in global trade and providing encouraging signs for policymakers amid efforts to bolster a hesitant economic recovery.

Customs data released on Thursday revealed that China’s exports, the world’s second-largest economy, were 7.1% higher than the previous year over the two months, outpacing a Reuters poll that anticipated a 1.9% increase. Similarly, imports rose by 3.5%, surpassing the expected growth of 1.5%.

This robust performance aligns with improved export data from other nations like South Korea, Germany, and Taiwan, benefiting from increased demand for semiconductors. The recovery in the electronics sector, coupled with a favorable base effect, contributed to the better-than-expected results, according to Xu Tianchen, senior economist at the Economist Intelligence Unit.

Chinese Premier Li Qiang recently announced a 2024 economic growth target of around 5%, emphasizing the need to transform the country’s development model. While facing challenges such as a property crisis, subdued consumer spending, and foreign divestment, policymakers seek sustained export growth as a crucial element to support economic strength.

Despite the positive trade data, manufacturing activity in China continued to contract in February for the fifth consecutive month, according to the government’s purchasing managers’ index. Some economists express concerns about the sustainability of the export strength, attributing at least part of the gains to Chinese manufacturers cutting prices to secure orders.

Market reactions to the trade data were relatively muted, with China’s stock indices experiencing modest declines. The trade surplus expanded to $125.16 billion, surpassing forecasts and reflecting an increase from December.

While there are optimistic signs, economists caution that China’s fiscal capacity is limited, and the effectiveness of further measures is uncertain. The focus on structural reforms and reorienting the economy towards household consumption remains crucial to mitigate risks of stagnation in the coming years.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, notes, “Strong exports help to offset part of the weakness from the property sector,” adding that it will likely strengthen policymakers’ confidence in China’s economy and support their structural policy objectives.

Source – Reuters

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