China: Surge in imports unlikely to last - Nomura

In view of the analysts at Nomura, China’s import growth in CNY terms surged to 44.7% y-o-y in February from 25.2% in January (Consensus: 23.1%; Nomura: 26.0%), most likely driven by strong domestic demand (investment demand in particular), rising international commodity prices and a calendar effect from the earlier-than-usual lunar new year this year which is unlikely to last. 

Key Quotes

“Export growth surprised on the downside, slowing to 4.2% y-o-y from 15.9% (Consensus: 14.6%; Nomura: 21.3%). The weak performance could be due to frontloading activity (which is more obvious in exports than imports) in January due to the lunar new year holidays. For January-February combined, export growth rose to 11.0% y-o-y from 0.6% in December. Given much higher import growth, the trade balance swung to a RMB60.4bn deficit in February from a RMB354.5bn surplus in January, the first deficit in 36 months.”

“Looking ahead, we do not expect the unusually strong import growth in February to continue given downside pressures on domestic demand from a cooling property sector and the government’s balance between economic growth and structural reforms. Also, a favourable base effect for rising prices is to fade in coming months. We maintain our forecast of real GDP growth at 6.5% in 2017.”