China’s Exports Defy Gloom Amid ‘Rampant’ Overseas Demand

China’s exports hit another record in September, driven by holiday demand and surging prices, Beijing said Wednesday.

Fears of a sharp deceleration in the world’s second-largest economy are among the most pressing concerns on traders’ long list of macro worries. China’s worsening energy crunch prompted many banks to project a kind of lost quarter for China.

Some continue to fret that Xi’s “zero tolerance” COVID policy risks exacerbating global supply chain issues. Twice this year, China temporarily curtailed activity at key shipping terminals in an effort to contain localized outbreaks. So far, the country’s trade numbers haven’t suffered.

Exports rose 28.1% last month, better than the 21.5% economists expected (figure below).

China leaned heavily on exports and, relatedly, industrial production, over the course of the pandemic rebound amid a more subdued recovery in domestic demand exemplified by retail sales, which remain a source of consternation. Imports underwhelmed in Wednesday’s data. September’s 17.6% pace fell short of the 21% growth consensus expected.

“The acceleration in exports was thanks to still rampant overseas demand ahead of the holiday seasons, and it seems that the widely reported power shortage in the second half of September has had limited impact on exports so far,” SocGen’s Michelle Lam and Wei Yao said Wednesday.

“Indeed, we note that the September electricity consumer data released this morning shows that growth of power consumption of all industries rebounded from 2.4% in August to 9.1%,” Lam added, on the way to cautioning that the outlook for exports is still “clouded by continued power rationing” and demand shifts from goods to services.

Overall, September’s trade data suggests more of the same: Global demand for goods produced in “the world’s factory” is robust and may be even more so in an environment characterized by pull-forward due to acute uncertainty around when (and even if) products can make it to market for the holidays in the west. Shipping rates have soared (figure below).

Those interested in a real-world take on the congestion at America’s ports are encouraged to peruse “‘It’s Not Sustainable’: What America’s Port Crisis Looks Like Up Close,” an expansive piece published by The New York Times this week.

Meanwhile, credit data for September showed aggregate financing was 2.9 trillion yuan, slightly below estimates (figure below).

New yuan loans were 1.66 trillion last month, also marginally below consensus (1.81 trillion).

Those aren’t large enough “misses” to warrant much attention, but this comes with the boilerplate copy about China’s credit impulse turning negative and the tightrope Beijing is attempting to walk as authorities endeavor to preserve the deleveraging push while assiduously avoiding any tightening steps that might choke off “good” credit at the worst possible juncture.

Invariably, analysts will extract a few ostensibly meaningful data points from September’s financing figures and when they do, I’ll be all ears. Until then, it’s enough to mention the headline numbers alongside the trade data and call that an “update.”


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