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6 May 2016
China: April foreign trade, foreign reserves preview – ING
Tim Condon, Chief Economist at ING, suggests that they credit PBOC policy for China’s slowing reserve losses from the US$100bn/month pace of November-January while their yearend USDCNY forecast is 6.47.
Key Quotes
“April trade data are due Sunday, May 8. The consensus forecast for export growth is - 0.5%. March’s +11.5% export growth was a one-off from base effects from extreme weakness a year earlier; the sequential bounce from seasonal January-February weakness left exports 21% below their 4Q average vs. 4% below on average in 2011-14.
China’s exports, unusually, underperformed those of their North Asian neighbours in the first quarter. While their -9.7% growth was in the same ballpark as Korea’s and Taiwan’s, it was a significant deceleration from 4Q16. Korea’s and Taiwan’s growth was little changed in 1Q16. Our baseline is that this underperformance won’t be reversed and 2016 export growth will be -9.1%.
The import growth forecast is -4.0%. The data are interesting in part because of their divergence from the amount banks report their customers as having bought to pay for imports. All estimates of capital outflows for 2015 include some portion of the US$524bn by which banks’ payments on behalf of clients for goods imports exceeded customs-basis imports.
We infer from the gap between banks’ payments and customs-basis imports that capital outflows persisted at the 2015 pace in the first quarter. We believe the can live with capital outflows as long as foreign reserves stay above US$3trn, which implies monthly declines of c.US$20bn. April foreign reserves data are due on Saturday, May 7 (consensus US$3.204trn, which implies a US$8.6bn decline from March).
We credit the PBOC’s steadier USDCNY fixing policy for stemming capital outflows and slowing reserve losses from the US$100bn/month pace of November-January. Our yearend USDCNY forecast is 6.47 (spot 6.51, Bloomberg consensus 6.69, NDF 6.62).”
Key Quotes
“April trade data are due Sunday, May 8. The consensus forecast for export growth is - 0.5%. March’s +11.5% export growth was a one-off from base effects from extreme weakness a year earlier; the sequential bounce from seasonal January-February weakness left exports 21% below their 4Q average vs. 4% below on average in 2011-14.
China’s exports, unusually, underperformed those of their North Asian neighbours in the first quarter. While their -9.7% growth was in the same ballpark as Korea’s and Taiwan’s, it was a significant deceleration from 4Q16. Korea’s and Taiwan’s growth was little changed in 1Q16. Our baseline is that this underperformance won’t be reversed and 2016 export growth will be -9.1%.
The import growth forecast is -4.0%. The data are interesting in part because of their divergence from the amount banks report their customers as having bought to pay for imports. All estimates of capital outflows for 2015 include some portion of the US$524bn by which banks’ payments on behalf of clients for goods imports exceeded customs-basis imports.
We infer from the gap between banks’ payments and customs-basis imports that capital outflows persisted at the 2015 pace in the first quarter. We believe the can live with capital outflows as long as foreign reserves stay above US$3trn, which implies monthly declines of c.US$20bn. April foreign reserves data are due on Saturday, May 7 (consensus US$3.204trn, which implies a US$8.6bn decline from March).
We credit the PBOC’s steadier USDCNY fixing policy for stemming capital outflows and slowing reserve losses from the US$100bn/month pace of November-January. Our yearend USDCNY forecast is 6.47 (spot 6.51, Bloomberg consensus 6.69, NDF 6.62).”