China’s trade surplus widened in October to $17.03 billion, up from $14.5 billion in September, but was still much smaller than expected. According to customs data released Thursday, exports rose 15.9% from a year earlier, down from September’s 17.1% rise, while imports rose 28.7% from a year earlier, up from a 20.9% rise in September. Analysts give their take:
External demand will likely weaken further to weigh on China’s exports in the coming months, posing the top near term risk to China’s growth… That said, we are expecting a continued moderation, not total collapse, of China’s exports. Despite a gloomy outlook for European demand and a slower global recovery, our base case scenario is not for a re-run of 2008… October’s much stronger than expected imports growth, of ordinary as opposed to processing goods in particular, underlines the strength of China’s domestic demand… China’s still resilient domestic demand, coupled with selective easing, should support a 8.5-9% GDP growth rate in the coming quarters. – Qu Hongbin and Sun Junwei, HSBC
The tumultuous events in the Eurozone are weighing heavy on China’s exports… A weak outlook in advanced economies will continue to feed into China’s trade data, acting as a brake on growth and potentially forcing the authorities’ hand in rolling out monetary easing. The Eurozone crisis remains, in our opinion, the greatest short-term risk to the Chinese economy… Import demand, on the other hand, is both up on September and a notch above market expectations. This provides further evidence that the domestic economy retains momentum in the face of aggressive tightening. – Xiangfang Ren and Alistair Thornton, IHS Global Insight
The mild slowdown of export growth is due primarily to weaker demand from developed economies and declining growth of export prices. Meanwhile the robust import growth in October suggests both the resilience of the Chinese economy and some initial positive impact of policy fine-tuning. Going forward, we expect that the trade surplus could be narrowed as import growth could consistently outpace export growth. – Ting Lu and Weijun Hu, Bank of America-Merrill Lynch
China’s cumulative trade surplus reached US$124 billion in the first ten months, 17% below the number [from] last year and a 6.6-[percentage point] drop compared to last month. We expect the surplus to further narrow with exports to be outpaced by imports… We reiterate our view that the RMB/USD exchange rate will likely appreciate to 6.3 by the end of this year, but if [the] trade surplus continues to narrow, the pace of appreciation may slow next year. – Daxue Wang, Shuang Ding and Minggao Shen, Citibank
