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China Trade

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2014 Media Kit
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China exports another sign of pick-up as leaders meet

By: | at 12:53 PM | Channel(s): International Trade  

A stronger-than-expected rebound in China’s exports in October added to a run of indicators suggesting the world’s second-largest economy has found its footing just as Beijing prepares to lay out its reform agenda for the next decade.

Improving demand from the United States and Europe lifted exports and helped reinforce the view that China has regained some momentum since mid-year after a protracted slowdown.

“China’s export numbers suggest some—although not yet decisive—improvement in global demand momentum,” said Louis Kuijs, an economist with RBS, in a note.

Exports increased 5.6 percent in October from a year earlier, the Customs Administration said on Friday, handily beating market expectations for a 3.2 percent rise and recovering from a 0.3 percent fall in September.

Attention is now on inflation and activity figures on Saturday, which will give a clearer overall picture of the health of the economy just as top politicians meet to lay out their reform agenda at the Communist Party’s third plenary session from November 9-12.

China’s leaders have repeatedly said they are reshaping the economy so it is driven by domestic demand rather than exports and investment, and that slower growth is acceptable while they push on with their reforms.

A Reuters poll shows inflation is expected to have risen to an 18-month high in October, retail sales and M2 money supply growth rates are seen edging up slightly, while investment and factory output tick down.

“Momentum Improving”

Exports have been a drag on the economy so far this year, subtracting 1.7 percent from growth in the first three quarters.

Weak global demand, a stronger yuan currency and rising labor costs have taken their toll on sales of Chinese goods abroad, but there are hopes of a sustained pick-up in global demand.

October’s rebound was driven by the United States, China’s largest trading partner, and a sharp turnaround in demand from the European Union where export growth jumped to 12.7 percent after a 1 percent contraction in September.

“Actual export momentum is definitely improving and that is very much consistent with improvements in the U.S. and European economies,” said Wang Tao, an economist with UBS.

Still, there remain some clouds over the outlook, including a strong yuan currency. And manufacturing and services sectors surveys for October painted a mixed outlook for trade.

“I believe there are several indicators already showing a weakness,” said Shen Jianguang, an economist with Minzhuo Securities.

“I think the most important is the lagged impact of renminbi (yuan) appreciation, especially against the Indian and Indonesian currencies, where it is around 15 percent higher.”

Exports directly create about 30 million jobs and add another 100 million in related industries, according to official estimates.

Earlier this year, export data was found to have been inflated by currency speculation and shipments to warehouses that were booked as trade payments and sales, and some economists expect the exaggerated figures to weigh on annual figures in coming months. (Reuters)