China's trade shrank in January from a year earlier, with a factory shutdowns for Lunar New Year holidays exacerbating a slowdown in external demand that has set Beijing on a pro-growth policy course to support the domestic sector.
Customs data on Friday showed imports sank 15.3% in January versus January 2011 -- the lowest since August 2009 -- while exports fell 0.5% over the same period, the worst showing since November 2009.
It left China with a trade surplus of $27.3 billion in January, its biggest in six months and confounding expectations of a further narrowing .
Data skewed heavily by the seasonal distortion of the week-long Lunar New Year holiday -- which fell in January this year and in February last and typically sees factories shut or run at half speed -- has left economists reading between the lines with the wide range of their forecasts a clear sign of uncertainty.
"I think the weak export and import figures are mainly a reflection of the seasonal factors from the Chinese Lunar New Year, and we should not read too much into the single month data, which is usually volatile," Sun Junwei, economist at HSBC Global Research in Beijing, said.
Analysts at Bank of America/Merrill Lynch said in a client note that making swift adjustments for actual days worked transformed the data.
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"There were 22 working days in January 2011 and 17 working days in 2012. With the adjustment, export growth was a positive 28.7% year-on-year in January and import growth was at a positive 10.0% year-on-year," the note said.
Investors are jittery after China's economic growth struck a 2-1/2 year low of 8.9% in the last three months of 2011, continuing a steady slowdown that had prompted the government in the autumn to switch policy settings to support growth, gently easing monetary and fiscal conditions since.
The slope of the slowdown has been shallow enough for the consensus to emerge that a hard economic landing will be avoided, even though many private-sector economists forecast that 2012 will see the slowest pace of expansion in a decade.
The first quarter of 2012 is widely regarded as likely marking the bottom of China's downswing and signs from the most recent Purchasing Managers Index survey showed a slight expansion of the factory sector in January.
Fall flagged
China's minister of commerce, Chen Deming, had flagged that January's numbers would not look pretty in a statement released on Thursday, adding that a stable yuan currency was needed to help Chinese exporters.
In a separate statement, China's State Administration of Foreign Exchange (SAFE) -- guardian of the country's $3.18 trillion of official reserves that have become the world's biggest largely on the strength of Chinese exports -- said the country's current account surplus would fall sharply in 2012.
"China is expected to maintain an international payments surplus in 2012, but the surplus will fall significantly with greater volatility," it said in a statement on Thursday.
SAFE said though that the surplus would remain despite the risk of external shocks to demand and capital flows.
The European Union is China's single biggest export market and the debt crisis in the bloc has been dampening demand for the goods turned out by the vast Chinese factory sector.
"China's current account, including cargo trade, will continue to report surplus," SAFE said.