The Financial Express

China expects inflation to moderate after solid January trade growth

Published: February 05, 2018 14:16:31 | Updated: February 06, 2018 13:22:35

A vegetable vendor counts his money at a market in Beijing, China on March 10, 2016. - Reuters file photo used for representation. A vegetable vendor counts his money at a market in Beijing, China on March 10, 2016. - Reuters file photo used for representation.

China is expected to report solid growth in January trade this week, moderating inflation and resurgent bank lending, but the timing of the long Lunar New Year holidays will make it difficult to determine clear trends in the world’s second-largest economy for at least another month.

Business surveys suggest a resilient start to 2018, with further expansion in manufacturing and robust growth in services. But most economists still expect a gradual loss of momentum in coming months as borrowing costs rise and the property market cools.

In coming weeks China will release foreign exchange reserves, trade, inflation and bank lending data for January, but it will not report combined January and February data for industrial output, retail sales, and investment until March in a bid to smooth out seasonal distortions.

Hundreds of millions of Chinese travel over the Lunar New Year holiday and many factories and businesses shut, often for weeks. This year the festivities begin on Feb. 16, versus Jan. 28 last year, according to a Reuters report.

Still, analysts will be scouring what data is available for clues on the state of both global and domestic Chinese demand.

January exports likely grew close to 10 per cent on-year, a Reuters survey of 55 economists showed. That would be a slight softening from December but still point to a solid start to a year that is expected to see an increase in trade disputes between China and the United States.

China’s imports may garner more attention, after a sharp deceleration in December added to worries of a slowdown. Import growth may have doubled to nearly 10 per cent, though some of the jump may have been due to inventory building ahead of the holiday rather than a pick-up in demand.

Foreign exchange reserves, meanwhile, likely rose for the 12th month in a row as a strong yuan and tight regulations discourage capital outflows.

China’s economy grew by a forecast-beating 6.9 per cent last year thanks to a construction boom and export recovery, but economists expect the pace to slow to 6.5 per cent this year, which could weigh on other emerging economies and commodities markets.

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