UBS: China Weekly — Stable February Credit, Stronger Trade, Higher Inflation; Mixed March Growth
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UBS reports that China's February data revealed stable credit growth, significantly stronger-than-expected trade figures, and an upside inflation surprise. New renminbi loans reached RMB 900 billion in February, broadly in line with expectations but down RMB 110 billion year-on-year. Aggregate social financing totaled RMB 2.4 trillion, slightly above estimates, with outstanding social financing growth stable at 8.2%.
Trade data for January and February combined showed exports surging 21.8% year-on-year, far exceeding market expectations of 7%. Imports grew 19.8%, driven primarily by IT components, whose growth accelerated from 15% to 37%. Both figures dramatically surpassed consensus estimates.
Inflation surprised to the upside, with CPI rising 1.3% year-on-year against expectations of 0.9%, partly due to Spring Festival timing effects. PPI deflation narrowed to -0.9% year-on-year, beating estimates of -1.4%. UBS subsequently upgraded its full-year CPI forecast to 0.6% and PPI forecast to 0.2–0.3%, noting PPI could turn positive as early as the second quarter.
High-frequency data for the first 14 days of March painted a mixed picture. Property sales across 30 major cities saw their year-on-year decline narrow to -13% from -24% in January and February. However, port throughput turned negative, steel production continued falling, and auto retail sales weakened.
UBS expects policy rate cuts of 10 to 20 basis points in 2026, with year-end social financing growth at 7.8%. The firm also highlighted upcoming data releases and the mid-March Paris meeting between Chinese and US officials.