Thursday, December 8, 2016

China November Exports, Imports Rise Unexpectedly, Commodity Purchases Soar

By Yawen Chen
December 8, 2016

China's imports grew at the fastest pace in more than two years in November, fueled by its strong thirst for commodities from coal to iron ore, while exports also unexpectedly rose, reflecting a pick-up in both domestic and global demand.

Imports expanded 6.7 percent from a year earlier, easily eclipsing economists' expectations for a drop of 1.3 percent and its strongest gain since September 2014, official data showed on Thursday.

Exports rose 0.1 percent from a year earlier, defying predictions for a 5 percent slide.

That left the country with a trade surplus of $44.61 billion for the month, the General Administration of Customs said, versus forecasts of $46.30 billion and October's $49.06 billion.

"The improvement reflects a strengthening in global demand, with recent business surveys suggesting that developed economies are on track to end the year on a strong note," Julian Evans-Pritchard, China economist of Singapore-based Capital Economics, said in a note.

Analysts polled by Reuters had expected a slightly more modest drop in November exports after a 7.3 percent contraction in October, while imports had been seen falling at roughly the same pace.

But China's imports of major commodities including iron ore, crude oil, coal, soybeans and copper all surged by volume in November, despite a sharp weakening in its yuan currency.

China imported 91.98 million tonnes of iron ore in November, up 13.8 percent from the previous month and the third highest monthly tally on record.

It also imported its largest volume of coal in 18 months, as utilities replenished stocks to cope with higher winter demand.

Copper imports surged 31 percent as traders stockpiled more metal amid robust construction demand.

"The rise in copper imports reflected in part a rise in Shanghai Futures Exchange inventories and stronger demand from the Chinese power and construction sectors," said Vivek Dhar, a commodities analyst with Commonwealth Bank in Melbourne.

"The debate dividing the market is whether this growth can be sustained into next year, or will things flatten out. This isn't necessarily clear just yet."

Performance Still Weak For 2016

Despite the upbeat November readings, the world's largest trading nation still looked set for another downbeat year.

Exports in the first 11 months of the year fell 7.5 percent from the same period a year earlier, while imports dropped 6.2 percent.

Weak exports have dragged on economic growth as global demand remains stubbornly sluggish, forcing policymakers to rely on higher government spending and record bank lending to boost activity, at the risk of adding to a mountain of debt.

Recent data had suggested the world's second-largest economy was steadying as the government rushed to launch new infrastructure projects and the housing market boomed, fuelling demand for building materials from steel bars to cement.

The official Purchasing Managers' Index (PMI) showed factory activity expanded at its strongest pace in more than two years, though a private survey pointed to more modest growth.

But analysts have warned that a property boom which has generated a significant share of the growth may be peaking, dampening demand for raw materials

China could also be heavily exposed to protectionist measures next year if U.S. President-elect Donald Trump follows through on campaign pledges to brand it a currency manipulator and impose heavy tariffs on imports of Chinese goods.

However, Chinese Customs said on Thursday that pressure on exports is likely to ease at the beginning of 2017.

Article Link To Reuters: