China's Exports, Imports Unexpectedly Surge
China’s export growth unexpectedly surged in August as suppliers likely boosted orders ahead of the year-end shopping season, offsetting any port disruptions due to fresh outbreaks of the delta virus.
Exports rose 25.6 per cent in dollar terms from a year earlier to a record US$294.3 billion, more than US$10 billion above any previous month. Imports grew 33.1 per cent to US$236 billion, also the highest level ever, leaving a trade surplus of US$58.3 billion for the month, the customs administration said Tuesday.
The pickup came despite disruptions at China’s second-largest port last month due to fresh virus outbreaks, which caused congestion and pushed up shipping costs. Global demand remained resilient, especially from the U.S. and Europe, as retailers probably brought forward their Christmas shopping orders.
“The hot season for Christmas came earlier than previous years,” said Xing Zhaopeng, senior China strategist at Australia and New Zealand Banking Group Ltd. in Shanghai. New products from Apple Inc. created demand, while delta virus outbreaks in Southeast Asia probably caused orders to be diverted to China, he said. “It will remain strong before November,” he said.
The top three exports by value were electronics, high-tech products, and clothing and clothing accessories, while the top imports were electronics and high-tech products, the data showed.
What Bloomberg Economics Says...
The strength likely reflects robust external demand as well as diverted orders from COVID-disrupted rival exporters. Looking ahead, though, export growth could cool in the fourth quarter as weaker new export orders hit shipments and the year-earlier base becomes less favorable.
-- Eric Zhu, China economist
Signs of a slowdown are starting to emerge globally as COVID cases rise, and officials in China have warned of weaker export growth for the rest of the year as risks build.
Manufacturing surveys last week showed a contraction in new export orders for a fourth consecutive month in August, which may signal a slowdown in the future. Beyond trade, the economy is taking a knock from a plunge in services activity related to COVID restrictions, a tightening in property curbs and lower infrastructure spending.
China’s effective control of virus cases may have led suppliers to divert orders from other Asian countries, which are battling delta outbreaks and struggling to keep manufacturing operations going. That advantage could ease though once the pandemic is contained elsewhere.
“A possible reason for strong exports is that given the logistics bottlenecks, exporters brought forward shipments for the coming Thanksgiving & Christmas season,” said Michelle Lam, Greater China economist at Societe Generale SA in Hong Kong. She expects trade to slow down given the contraction in the PMI export orders and the loss in momentum in U.S. consumption.
The Meishan terminal at Ningbo port was shut for two weeks in August to contain a virus outbreak there, and even though it was reopened late in the month, it will likely take a while for congestion at the port to ease.
China’s continued export strength should provide some support to the economy amid a slowdown in domestic demand after tighter restrictions on the country’s real estate sector and a slower pace of sales of local government special bonds, which are mainly earmarked for infrastructure construction.
Policy makers have vowed to ramp up financial support for small businesses and pledged better use of local government bonds as the economy shows further signs of a slowdown. The People’s Bank of China will provide 300 billion yuan (US$46.4 billion) of low-cost funding to banks so they can lend to small and medium-sized companies, China’s State Council said last week. It also pledged to “reinforce its policy options,” improving the ability to cope with challenges to ensure a stable economy and employment.
“This data may ease the worry about a more abrupt and sharper slowdown in the third quarter although they reinforced the uneven recovery momentum,” said Liu Peiqian, China economist at Natwest Markets in Singapore. “We maintain our view that targeted easing are preferred policy options, such as relending, targeted liquidity operations as well as targeted fiscal easing, and we do not expect any benchmark rate cut in 2021.”