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China trade better than expected in December, but nothing to shout about

CHINA's trade performance was better than expected in December, but nothing to cheer about, forwarders told Lloyd's Loading List.

Driven by improved demand to the EU, which was up 1.7 per cent year on year. China posted negative export growth of minus 1.4 per cent when most analysts expected exports to drop seven per cent in December.

With Chinese New Year falling early on February 8, freight demand in December was also boosted by the rush to beat factories closures over the holiday.

HSBC said the improvement in China's export growth in December will not last. "We believe external demand may have picked up modestly towards the year end," said the bank. "While exchange rate movement is also a variable, the impact may not have been as important as the state of external demand."

HSBC said that while the yuan had weakened against the euro in December, it had weakened by an even larger degree in August, with little sign that this had translated into any obvious or sustained gain for exporters.

"Therefore we are more inclined to believe that the stronger number for December reflected a modest pickup in demand towards year-end," said a note from the bank. "As far as external demand is concerned, the larger developed markets will remain the most important to watch for any sign of sustained recovery.

"As leading indicators such as the PMI readings have softened again lately, the improvement may not be sustained in the coming months."

Nomura was more upbeat on China's exports this year, predicting "modest, positive growth" in 2016, partly due to the low base established in 2015.

"Overall the December trade data and leading indicators have offered further signs of the economy stabilising, albeit at a lower level," said the bank.

Despite the weak fundamentals for forwarders moving cargo out of China and Hong Kong, Dr Tsui said low ocean freight rates were not yet becoming a major financial issue for most forwarders.

"For forwarders, low ocean rates will not impact us as most pass the reductions in ocean freight to the customer, and add a slim profit on top of the cost to survive," he added.