* Exports and imports rise more than expected, Asia stocks
* Lending figures show strong demand for credit, ample
* Data boosts global and China economic recovery hopes
* Inflation pressures subdued, but central bank wary
* Figures come ahead of holiday, which can distort trend
By Nick Edwards
BEIJING, Feb 8 China's exports and imports
surged and new lending soared in January as the first hard data
of the year signalled not only a solid recovery in domestic and
overseas demand, but also the risk that inflationary pressures
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.
New lending by China's banks in January beat expectations at
1.07 trillion yuan ($172 billion) and more than doubled from
December. Total social financing - a broad measure of liquidity
in the economy - leapt to 2.54 trillion yuan, well ahead of
December's 1.63 trillion yuan.
Economists were cautious about reading too much into one
month's data undeniably distorted by the timing of Lunar New
Year holidays, which fall in February this year but were in
January in 2012. Still, the consensus view suggested an economic
recovery that started in late 2012 was strengthening.
"Overall this says there is no need to worry about the
strength of China's recovery," Sun Junwei, China economist at
HSBC in Beijing, told Reuters.
"These were very strong numbers, particularly total social
financing. This means to me that beyond the rebound in bank
lending there is strong demand for credit in the economy," Sun
said, predicting upside surprises to data ahead.
After seven straight quarters of a slow down, growth picked
up in the fourth quarter. Still, 2012 marked the slowest year of
growth for China since 1999.
Investors bought the argument that an economic recovery was
intact. Stock prices in Asia rose, despite pressure to take
profits around the region ahead of next week's Lunar New Year
lull, while oil and copper futures also gained ground.
The stronger-than-expected exports also pointed to signs of
a recovery beyond China's borders in the giant economies of the
United States and the European Union.
January's consumer inflation fell to 2.0 percent from
December's seven-month high of 2.5 percent, suggesting price
pressures are subdued for now.
Economists expect inflation to gather steam through the
first quarter, though likely staying below 3.5 percent in 2013,
a level they think the government will soon announce as its
The overall strength of the data underlines a more cautious
line being taken by the central bank, which indicated a shift in
its policy back towards inflation risks from growth in a
fourth-quarter monetary policy report on Wednesday.
"As the economy transits into another stage of growth,
economic controls need to always emphasise containing inflation
risks," the People's Bank of China said.
Yao Wei, an economist at Societe Generale in Hong Kong,
agrees there is reason to worry, pointing to January's 2.9
percent year-on-year rise in food prices.
CPI rose 1.0 percent in January from December, ahead of the
0.9 percent Reuters consensus forecast and the strongest monthly
gain since January 2012. In fact, 90 percent of the increase was
due to rising food prices, said Yu Qiumei, a senior statistician
at the National Bureau of Statistics.
Apart from higher state investment as a potential source of
inflation, the housing market is showing signs of strength once
again as prices climb towards record highs despite curbs to try
to cool the market.
MONEY SUPPLY TRAJECTORY
The trajectory of money supply is key against that backdrop,
with investors focusing on bank lending to try to assess the
bias of monetary policy as loans are made at Beijing's behest in
the state-directed financial system.
The market consensus is for the PBOC to keep policy settings
neutral through 2013 to ensure an economic recovery is
well-entrenched. The policy risk appears to be shifting towards
tightening, rather than easing, if the strength of domestic and
external demand implied in January's trade data is more than a
quirk of base effects.
"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."
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
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.
External demand appeared strong, even adjusting for the five
additional working days the Customs Administration said were
included in its January 2013 data versus January 2012. Exports
rose 12.4 percent after adjusting for the holiday factor while
imports rose 3.4 percent.
China publishes the bulk of its economic data for January
and February combined in March to smooth the effects of the
annual shift in the Lunar New Year holidays when many factories
shut for at least a week and often longer.
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
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
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.