China exports surge, but policy easing still needed

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China's trade picture improved in December after a poor showing in November, suggesting that the world's second-largest economy ended the year on a more solid footing.

Nevertheless, the data has not dented expectations for further monetary easing in the coming months.

Exports jumped 9.9 percent from the year-ago period, official data showed on Tuesday, much better than Reuters expectations for a 6.8 percent increase and after climbing 4.7 percent in November.

Imports fell an annual 2.3 percent, narrower than a forecast drop of 7.4 percent and following November's 6.7 percent decline.

This brought the trade surplus to $49.1 billion, compared with $49.85 billion expected and a $54.47 billion print in November.

The Australian dollar, which is highly-sensitive to Chinese data, edged up to $0.8175 from $0.8170 on the news.

"The data shows the resilience of Chinese exports in the face of soft global demand – and this is positive because China still relies heavily on foreign markets for generating economic growth," Dariusz Kowalczyk, senior economist and strategist at Credit Agricole told CNBC.

"But, we still think the data is consistent with the need to ease policy in order to achieve stronger domestic demand," he added.

While the data lessens the urgency for the People's Bank of China to act, Kowalczyk expects the central bank will cut both interest rates and the reserve requirement ratio (RRR) by the end of the first quarter. He sees a second RRR cut in the second quarter.

China's economy likely grew 7.2 percent in the fourth quarter and 7.4 percent for the full year, according to Credit Agricole. Fourth quarter gross domestic product (GDP) data will be released on January 20.

Chang Chun Hua, China economist at Nomura expects even more aggressive monetary easing this year: a 50 basis point cut to the RRR in each quarter of 2015 and an interest rate cut in the second quarter.

He also cited weak domestic demand highlighted by the import data.

"Even excluding commodities, ordinary imports are still contracting on a year-on-year basis, reaffirming the signals from the PMIs [Purchasing Managers' Index] that China's domestic demand remained weak in December," Chang said.

The final China HSBC PMI for December indicated manufacturing contracted for the first time in seven months, with both output and new orders declining.

The final reading came in at 49.6, up slightly from the preliminary reading of 49.5 from HSBC/Markit, but still lower than November's 50.0. A reading above 50 indicates growth, while a reading below signals a contraction.

Meantime, China's official Purchasing Managers' Index (PMI) slipped to 50.1 in December from November's 50.3.