China’s trade surplus expanded from $14.5 billion to $16.5 billion in December, well above forecasts centred on an $8.78 billion surplus.
- Imports slower than expected: Exports rose 13.4 per cent over the year (forecast 13.5 per cent) while imports rose by 11.8 per cent (forecast 17 0 per cent).
- China recorded a trade surplus of $155.1 billion in 2011.
What does it all mean?
The latest Chinese trade data gives authorities further reason to ease monetary policy and boost economic growth. While export growth was in line with market forecasts, import growth fell well short of expectations. With inflation under control and numerable risks from abroad, China is well justified in seeking to stimulate the domestic economy – most likely through a reduction of bank reserve requirements. The healthy trade surplus is further reason to stimulate the economy and therefore head off US rhetoric about the need to boost the yuan (renminbi). The yuan was the third strongest currency in 2011.
What do the figures show?
China recorded a trade surplus of $16.5 billion, up from $14.5 billion in November but below the 5-year average of $18.4 billion. Exports rose 13.4 per cent over the year – the slowest growth in 10 months. Imports rose by 11.8 per cent over the year – the slowest growth in 26 months.
For 2011 as a whole the trade surplus stood at $155.1 billion, down from $181.5 billion in 2010. The rolling annual trade surplus bottomed at $151 billion in November before lifting in December.
What are the implications for interest rates and investors?
The trade result is encouraging for Australian raw material suppliers. Import growth has predictably slowed in line with the domestic economy and the annual growth pace is the slowest in over two years. Chinese authorities would now be more comfortable about boosting growth and there will be no shortage of cheer-leaders in other parts of the globe which would gain from a stronger Chinese economy.
