Start of the Year Foreign Trade: A Very Bright and Remarkable Signal

Exports and imports in January-February surged with double-digit growth, confirming the strong reality of foreign trade at the start of the year. But more importantly, how will this above-expected strong performance unfold? We believe that, aside from seasonal factors, three additional supports are the overseas capital expenditure cycle, regional expansion, and the rush to export driven by photovoltaic export tax rebates.

From a vertical perspective, despite the disturbance caused by the Spring Festival, compared to the same period in history, the export growth rate in January-February (21.8%) is only slightly lower than in 2018 and 2021 over the past decade, remaining at a seasonal high; from a horizontal perspective, China’s exports in January-February also hold their own against major exporting countries like South Korea and Vietnam.

In our year-end report “2026 China Macroeconomic Outlook: Ten Questions and Answers,” we pointed out that “export growth” is one of the core themes throughout macroeconomic analysis. The impressive performance in January-February has preliminarily confirmed this. But under the shining data at the start of the year, to what extent can exports “grow” this year?

Behind the strong start to exports, there is a short-term disturbance caused by the Spring Festival timing mismatch. Historically, manufacturers tend to ramp up exports before the festival, so a later Spring Festival often boosts exports in January-February and suppresses March figures. This year’s Spring Festival was delayed by nearly 20 days compared to last year, further encouraging companies to rush orders in January-February.

Besides seasonal factors, what other unusual factors support high export growth?

First, the strong export performance closely mirrors the overseas capital expenditure cycle. Since the beginning of the year, manufacturing activity in major global economies has generally improved, with global manufacturing PMI rising to 51.9%. Major economies like the US and Eurozone have returned above the growth threshold, clearly indicating a recovery in external demand, which has significantly boosted China’s exports. This is also reflected in South Korea’s impressive export performance at the start of the year.

Second, companies are accelerating the transfer of orders to emerging markets, with exports to Africa leading again. Exports to Africa in January-February grew nearly 50%, just below the high levels seen in September last year, making it an important growth driver for China’s exports; at the same time, re-export trade through ASEAN and Hong Kong, as well as European markets, maintained double-digit growth, forming the core driving force of early-year exports.

Third, the cancellation of photovoltaic export tax rebates may have prompted some industries to “rush to export.” Influenced by expectations of policy adjustments in photovoltaic export rebates in April, companies have engaged in some front-loading of shipments, boosting exports in sectors like new energy vehicles, power electronics, plastics, and glass.

Compared to the strong exports, imports are also “holding their own,” reflecting a certain recovery in domestic demand. Although in January-February, the fastest-growing imported products are still mainly high-tech products like automatic data processing equipment and integrated circuits, which are more technologically advanced, the growth rate of traditional consumer and resource imports is also gradually warming. From volume and price perspectives, compared to last year, the import quantities of iron ore, crude oil, and lignite have improved year-on-year, not solely driven by prices. This indicates a certain recovery in domestic demand, though overall growth remains slightly weaker than exports.

Looking ahead, in the context of exports outperforming imports, a high trade surplus is expected to continue. This could provide steady support for economic growth at the start of the “14th Five-Year Plan”; additionally, the high growth of the current account surplus will strengthen the fundamentals for exchange rate stability, supporting the appreciation of the RMB.

Source: Guolian Minsheng Taocuan Team

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