China’s exports and imports are expected to grow by 4 percent and 2.2 percent in 2017 as global trade is likely to warm slightly, according to a research paper released by Nomura Securities.
The company published the paper after China released its January trade data, which showed exports and imports had jumped 15.9 percent and 25.2 percent year on year.
“Trade growth in January was much stronger than expected, not only due to a favorable base effect but also following an improvement in external demand,” the Nomura paper noted.
“We believe China’s exports are benefiting from the depreciation of the RMB’s real effective exchange rate [REER] over previous quarters. The J-curve effect of a weaker REER in boosting external demand has likely started to kick in,” it said.
The company attributed strong imports in January to brisk property investment and a rally in commodity prices. It expects property investment growth will remain stable in the first quarter.
Thanks to the RMB’s much weaker REER, the company forecast that China’s exports will improve in 2017. However, trade growth may not remain at its current height for long.
“We expect property investment to lose steam after Q1, which, by then, could act as a drag on imports. Trump’s hawkish trade policy stance toward China also adds downside risks to China’s export growth,” it added.