China Economy, Housing, and Lumber Shipments
The State of the Economy
China’s exports and imports surged in January as the first hard data of the year pointed to robust domestic demand and a pick up in the economy not solely explained by the timing of the Lunar New Year holiday.
Exports grew 25 percent from a year earlier versus a forecast of 17 percent in a Reuters poll. Imports surged 28.8 percent to comfortably beat a consensus call of 23.3 percent and the resulting $29.2 billion trade surplus topped a market expectation of $22 billion.
“I think the Chinese New Year effect only explains part of the story,” Zhang Zhiwei, chief China economist at Nomura in Hong Kong, told Reuters. “After controlling for the Chinese New Year, the numbers are still very strong and show the economic recovery is on track.”
Global markets have risen in anticipation of a surge in China’s export growth as a signal of recovering demand in the giant economies of the United States and the European Union. Markets had also moved to factor in an easing of China’s inflation, forecast at 2.0 percent in a Reuters poll from December’s seven-month high of 2.5 percent.
China’s year-on-year exports growth to the United States of 14.5 percent was the strongest in 10 months, while the rise in exports to the European Union were the highest in 13 months at 5.2 percent.
Exports to China’s neighbouring economies in the Association of South East Asian Nations (ASEAN) leapt 48.6 percent versus January 2012, worth $20.1 billion.
DOMESTIC DEMAND STRONG
The strength of imports and what that implied for the health of the domestic economy that was most telling to Tao Wang, China economist at UBS in Hong Kong.
“It seems to me that imports were particularly strong and that reflects two things: one is that the domestic demand, in particular investment demand, is very strong. The second thing is that it seems that companies are restocking ahead of the Chinese New Year and ahead of the peak season in March and April,” she said.
Imports from the United States soared 49.7 percent, those from ASEAN jumped 36.5 percent and imports from the European Union rose 20.7 percent. Imports from Taiwan rocketed 74.8 percent, making the 12.9 percent rise in imports from Australia look anemic.
Analysts in general, however, are wary of reading too much into data coming just one month after the world’s second-biggest economy posted its slowest full-year expansion since 1999 at 7.8 percent.
Ting Lu, head of Greater China economics at Bank of America/Merrill Lynch, was particularly cautious in his reading of the trade data, noting that import prices were rising in tandem with China’s recovery. Iron ore, for example, has surged 79 percent from September 2012 – the bottom of China’s 2012 growth cycle.
Lu forecasts 2013 export growth unchanged from the 7.9 percent pace in 2012, but thinks import growth could rise to 11.5 percent from 4.3 percent in 2012 as prices rebound.
An uptick in imported inflation already appears to be on the mind of the central bank, even though economists expect it to remain subdued through the first quarter of the year and unlikely to breach 3.5 percent in 2013, a level they think the government will soon announce as its target.
The trajectory of money supply is also important against that backdrop, with bank lending a focal point for investors trying to assess the bias of monetary policy, as loans are made at Beijing’s behest in the state-directed financial system.
China’s new yuan loans may have totaled 1 trillion yuan in January, according to a Reuters poll – up sharply on December’s 454.3 billion yuan and November’s 522.9 billion yuan.
A surge could indicate a supportive policy stance – despite the PBOC’s inflation alert – as well as strong credit demand in the real economy, but it could just as easily show banks flush with fresh state-directed lending quotas and anxious to put them to work early. Source: Reuters
The Housing/Construction Market
Property prices ticked up last month in many Chinese cities, raising the chances of further government action to cool the housing market.
Prices jumped in 54 of the 70 cities tracked by the government in January, according to data released Friday by the National Bureau of Statistics.
The average price change was an increase of 0.6%, the first year-on-year acceleration in 11 months. Compared to the previous month, prices rose 0.5%, which is the fastest rate of growth since January 2011, according to economists at Nomura.
China has gradually eased property ownership restrictions in recent decades, and its citizens have responded by pouring money into housing.
The resulting growth was so red-hot that many analysts feareda bubble was developing. But more recently, China’s real estate market had slowed amid government efforts to rein in speculators and control prices.
The measures include higher down payments, tough qualifications for mortgages, residency requirements and limits on investment purchases.
The slowdown spurred developers to offer discounts to unload their unsold inventory. Spooked by falling prices, would-be buyers stayed on the sidelines, and investors mourned declining valuations.
January’s increase is likely attributable to looser monetary policies and an abundance of liquidity — general stimulus measures taken by Beijing recently to combat a slowing economy.
But Beijing is still wary of rising property prices, and will likely respond with cooling measures.
“We believe the recent rise in property prices will pressure the government to tighten policies,” economists at Nomura wrote Friday.
And indeed, the government is already signaling some action.
China’s State Council said Wednesday that cities where prices have “soared too fast” will be asked to “introduce timely curbing measures.”
And in a bid to maintain supply, the council said it would guarantee land supplies for housing projects at no less than last year’s level.
Twenty-five cities in November and 12 in October experienced a price hike on a yearly basis, indicating a rally in the housing market.
The average price increase in those cities was 4.7%, up from last month’s 2.4% rise in property prices for new homes, the NBS figures showed on Friday.
“Despite measures to cool property market speculation, housing demand still grew steadily in the second half of 2012, resulting in a rebound in prices, and this trend is continuing into early 2013,” Mark Budden, China manager of property consulting firm EC Harris told China Daily.
The usual suspects — Beijing, Shanghai and Guangzhou — led the ongoing spike in housing prices. New home prices in Beijing rose by 3.3% from January 2012 and are up 1.6% from December levels. Guangzhou prices rose 2% on the year and 4.7% from December, with Shanghai roughly following suit. Source: various Chinese journals
B.C. Softwood Lumber Exports to China, as of December’12
BC softwood lumber export volume to China in for 2012 reached 7.5 million cubic meters, a 2.2% increase over 2011. BC softwood lumber export value for this period reached $1.1 billion, a 2.1% decline over 2011.