China’s Imports unexpectedly grew in October, while exports contracted at a quicker pace. This mixed set of indicators highlights the persistent risks faced by the world’s second-largest economy, despite a recent improvement in domestic demand. The trade figures follow a series of mostly positive data that showed Beijing’s support measures have helped boost a tentative comeback. However, the ongoing property crisis and soft global demand continue to pose challenges for policymakers.
According to customs data, exports in October shrank by 6.4% compared to the previous year, which is faster than the 6.2% decline in September and worse than the 3.3% fall expected in a RushHourDaily poll. On the other hand, imports rose by 3.0%, surpassing forecasts for a 4.8% contraction and reversing the 6.2% fall in September. This marks the end of 11 consecutive months of decline in imports.
Economist Zhou Hao commented on the unexpected figures, stating that they contrast with market expectations. He also mentioned that the poor export data may impact market confidence, as the recovery of the export supply chain was anticipated. However, the significant improvement in imports may be attributed to rising domestic demand, particularly the need to replenish stocks.
The data on China’s imports and exports reinforced concerns about a fragile and uneven recovery, leading to a decline in the yuan and Chinese stocks. China’s official purchasing managers’ index for October showed a continued shrinkage in new export and import orders for the eighth consecutive month. This suggests that manufacturers are struggling to find buyers overseas and are ordering fewer components.
Xu Tianchen, a senior economist at the Economist Intelligence Unit, explained that China’s poor export data indicates weak demand in other categories, such as Christmas goods and garments. He added that the positive surprise in imports reflects a strengthening of domestic demand rather than distortions caused by one-time bulk buying of commodities.
In October, China imported 13.52% more crude oil compared to the previous year, with a marginal increase from September’s growth. Additionally, soybean imports jumped by 25% due to the surge in cheap and plentiful shipments from Brazil. However, trade with China’s major peers continued to contract, with exports to Southeast Asia, its largest trade partner, down by 15.1%.
Trade with Australia was an exception, as relations between Beijing and Canberra improved. China has recently lowered trade barriers on Australian barley and wine exports. In October, exports to Australia rose by 5.9%, while imports from the resource-rich nation increased by 12.0%.
The higher imports narrowed China’s overall trade surplus to $56.53 billion in October from $77.71 billion in September, falling short of the forecast of $82.00 billion. Analysts caution that it is too early to determine whether recent policy support will be sufficient to shore up domestic demand. Challenges such as the property crisis, unemployment, and weak household and business confidence continue to threaten a sustainable rebound.
China’s manufacturing activity unexpectedly contracted in October, further complicating efforts to revive growth. Julian Evans-Pritchard, head of China Economics at Capital Economics, noted that measures of foreign orders suggest a more significant drop in foreign demand than what has been observed in the customs data. He expects most advanced economies to experience mild recessions or weak GDP growth, which will weigh on their demand for foreign goods.
In conclusion, the mixed trade figures highlight the ongoing risks faced by China’s economy, despite some positive indicators. The property crisis, soft global demand, and challenges in the manufacturing sector continue to pose obstacles to a sustainable recovery.
