China’s economy may be beset with difficulties, but trade remains robust.
Exports and imports both notched new records in November, data out Tuesday showed, suggesting external demand is voracious and domestic demand resilient, despite myriad headwinds.
Shipments rose 22% YoY last month in dollar terms, easily ahead of the 20.3% consensus (figure below). It marked the 14th consecutive month of double-digit growth.
Imports printed a huge upside surprise. The 31.7% increase was 10ppt ahead of the median estimate and well above the highest guess from nearly two-dozen economists. The range was 16.3% to 29.8%.
There were “no signs of slowing in China’s export momentum,” SocGen’s Michelle Lam wrote, noting that even the deceleration from October’s 27% increase was explainable by negative base effects. Shipments were strong “across the board,” she said.
Notably (and this is a decidedly unpalatable state of affairs for some China hawks in Congress), the world’s second-largest economy benefits both from re-opening and virus flare-ups.
Although the abatement of the pandemic increases demand for services at the expense of cheap physical goods, better growth outcomes abroad are still beneficial for “the world’s factory.”
On the other hand, pandemic dynamics increase demand for goods produced in China, including PPE and cheap electronics that facilitate work-from-home arrangements.
And then there’s the holiday shopping season in the West and inventory shortfalls tied to still-impaired supply chains.
“Our view is that strong exports could continue for a while longer as inventories in the US remain stuck at low levels,” Lam went on to say Tuesday, adding that “the Omicron variant could also delay the rotation from goods spending to services spending in advanced economies.”
Ultimately, China wins either way. The export machine rolls on. And although Beijing seems keen to emphasize that monetary policy, to the extent it does pivot to easing, is aimed “mainly” at bolstering the “domestic economic recovery” (to quote a report published to the WeChat account of a PBoC newspaper on Tuesday), an easing cycle in China could conceivably help support the global economy at a time when developed market central banks are seen teetering on the brink of a policy error.
It’s easy to suggest domestic demand in China could decelerate considering the property curbs, environmental targets and rolling lockdowns associated with the Party’s “zero COVID” policy. But according to most accounts, officials are now inclined to adopt supportive policy measures. While China won’t abandon the green goals which exacerbated the energy crunch, Beijing may ease restrictions to mitigate severe shortages. The same applies to the property crackdown: Xi wants to rein in the worst excesses without triggering an outright crisis.
As Bloomberg wrote Tuesday, “both the value and volume of metal and energy imports soared,” with coal import volumes reaching YTD highs. “Natural gas imports were the strongest since January, while crude purchases reached a three-month high,” the same linked article noted.
Overall, commodity imports grew more than 50%. “Apart from price effects, volumes of oil, iron ore, copper and steel picked up further, probably reflecting easing impact of power shortages and improving infrastructure capex demand,” SocGen’s Lam went on to say.
Meanwhile, Alibaba rebounded dramatically from a multi-day swoon, dragging the beleaguered Hang Seng Tech Index along for the ride. Hong Kong shares rose nearly 3% in what some described as “bargain-hunting” following the RRR cut.