New Year blamed for China imports dip

China’s imports fell sharply in February and export growth slowed after factories and offices closed for the country’s New Year holiday.

Imports fell 15.2 per cent year on year after rising 28.8 per cent a month earlier – a drop that would, under normal circumstances, raise concerns about the strength of Chinese demand.

Exports rose 21.8 per cent year on year in February, down from 25 per cent growth in January. That left China with a $15.3bn surplus for the month.

But analysts cautioned against reading too much into the figures.

China’s lunar new year celebration fell in the second week of February and it takes many companies as long as a month to hire new staff and restart their production lines, leading to serious distortions in economic data at the start of 2013.

The government warned this week when presenting its plans for 2013 that the outlook for exports was “grim”. It forecast only single-digit trade growth for the year as a whole.

That is not as big a concern for China as it would have been half a decade ago because the economy has steadily become less reliant on exports. Many analysts expect the country to improve on last year’s 7.8 per cent growth on the back of stronger domestic investment and consumption, even as exports remain sluggish.

Because the Chinese New Year holiday fell in January last year and in February this year, analysts said it was better to look at aggregate trade data for the two months to make sensible year-on-year comparisons.

On that basis, Chinese export and import growth both held up reasonably well. Exports were up 23.6 per cent in the first two months of 2013 from a year earlier, while imports were up 5 per cent.

But even this two-month comparison might be misleading since the slowdown in factory activity has carried through into March because the New Year celebration fell later than usual in February.

“This can mean even the January and February combined data are distorted on the upside and the unwinding of the Chinese New Year distortions would happen in March,” said Song Yu, an economist with Goldman Sachs.

Although it is difficult to get a read on the Chinese economy at this point in the year, asset markets have pointed to a clear upturn in activity. Property prices shot up in January and February and until a recent dip the stock market had risen strongly since December.

Worried about an overly fast rebound in the property market, the government announced tough new measures last month to rein in prices. With a record amount of foreign capital streaming into China in January, the central bank has also started to withdraw excess cash from the economy.