Trade recovery

From "Greater China Data Watch" by Wang Qian, Grace Ng, J.P. Morgan economists, March 12

The February trade details suggest that, while shipments in mechanical and electrical products continued to expand solidly, exports of low-end consumer goods outperformed. Details showed that shipments to developed markets were particularly impressive. In addition, after a notable fall in January, imports of major commodities gained modestly in February but remain below December levels. Overall, further solid expansion in January-February exports suggests that China’s export activity is tracking a solid recovery trend. The latest data on the global front suggest further sturdy but more moderate manufacturing growth and are consistent with our view that the boost to GDP growth from the turn in the inventory cycle is past its peak. However, there is also evidence that the anticipated broadening in the base of economic growth is taking hold and the motion of the global economy is now firmly directed toward delivering self-sustaining growth. As such, even if the lift from the upturn in the global manufacturing inventory cycle started to moderate, the external environment for China’s export sector would remain supportive as the recovery in global demand broadens and improves.

From "China Banks: Bills – the shift from mix to yield" by Sarah Wu, Nick Lord and Rachel Li, Macquarie analysts, March 15

We believe the 2009 surge in off-balance sheet commercial bills is unlikely to be repeated. We expect off-balance sheet commercial bills issuance volume to fall y/y back to a more normalized level, as the smaller banks become less inclined to chase this business given potential capital constraints. We assume issuance of off balance commercial bills to decline by 8% y/y, to around RMB9.5 trillion in 2010, compared to RMB10.3 trillion in 2009. As a result, we also expect to see a modest fall in the deposits generated by these activities. If we assume guarantee deposits represented between 20-25% of corporate deposits, then this could cost around 2% on corporate deposit growth in 2010. Interestingly the February 2010 monetary data showed a net outflow of corporate deposits for the first time since January 2009 … We believe discounted bills balances will continue to fall into 2Q10 and rebound slightly into the 2H10, given the combination of falling gross off balance sheet issuance and lower demand for discounting of bills. However we believe most of the positive loan mix impact on margins is done. We expect discounted bills as % total loans to remain broadly stable in 2010.