Trade recovery lightens the gloom

Mainland authorities may have found something to smile about in a slew of discouraging economic data: trade recovery.

Government spokesmen Sheng Laiyun from the National Bureau of Statistics and Shen Danyang from the Ministry of Commerce said the official export and import figures had underestimated the real - and favourable - trade performance.

Shen told a press briefing yesterday that the ministry remains "fully confident" that exports and imports would meet the government's annual target of a 7.5 per cent growth this year. "The trade situation will recover in the second quarter," likely starting in May, Shen said.

The mainland is expected to maintain a trade surplus for some time, though the gap would gradually narrow, he added.

Exports in March surprisingly fell 6.6 per cent from a year earlier. Imports dropped by a sharper 11.3 per cent, generating a US$7.7 billion surplus. Shen attributed the unexpected decline to the "unusually high" comparison base last year, particularly in trade with Hong Kong.

Analysts believe that last year's trade figures were inflated to mask an influx of speculative funds betting on yuan appreciation.

The lacklustre economic performance in emerging countries such as India and South Africa has hurt demand for China's products this year, Shen added.

But in the first quarter, the value of deliveries made by exporters rose 4.2 per cent, showing that real demand is more robust than the data indicates, both spokesmen noted. In addition, nearly half of mainland provinces reported double-digit growth in imports and exports in the quarter, adding to evidence of a rebound in trade.

But researchers also caution that uncertainties remain.

"The outlook for exports is affected by two factors. We need to see whether the impact of a global economic recovery outweighs rising labour costs," said Song Li, vice-director of the economic research institute under the National Development and Reform Commission.

Zhang Liqun, a researcher with the State Council's Development Research Centre, warned that bumps still lay in the road to recovery in developed economies, with risks ranging from the European debt crisis to the rise in the consumption tax in Japan.

The ministry also reported a year-on-year drop of 1.5 per cent in foreign direct investment in March to US$12.2 billion.

Shen said monthly FDI readings were often affected by individual investment projects and exchange-rate fluctuations. Foreign investment would show a steady full-year growth, he said.

The mainland economy expanded 7.4 per cent in the first quarter, the slowest since 2012. Property investment growth in particular slumped in a tight credit environment.

Song said reasonable liquidity should be maintained to ensure stable growth and prevent any "collapse in the funding chain" in the property sector.

"Too much money and credit supply would exacerbate existing risks. But insufficient money supply or a sudden squeeze on liquidity due to any reason could crack the chain of credit and fuel new risks," he said.