China exports beat estimates in sign of global pick-up

Last Updated: Sun, Nov 11, 2012 04:56 hrs

China's exports rose more than estimated in October, adding to signs the world's second-biggest economy will rebound this quarter after industrial output climbed at the fastest pace in five months.

Overseas shipments increased 11.6 per cent from a year earlier, the Beijing-based customs administration said in a statement today. That compared with the 10 per cent estimate in a Bloomberg News survey of economists and was the fastest rate since May. Imports rose 2.4 per cent, the same pace as the previous month. The trade surplus widened to $32 billion, the biggest in almost four years.

China's transition to a new generation of Communist Party leaders, which began in Beijing this week, may be smoothed by the reversal of a slowdown that started in last year's first quarter. The September-October pickup in export growth shows the economy is starting to stabilise, Commerce Minister Chen Deming said today at a briefing in Beijing.

"We are still cautious, but the robust export growth around 10 per cent for two consecutive months might truly point to a real rebound," said Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong. The "elevated" trade surplus may mean the central bank will be reluctant to cut lenders' reserve requirements, Lu said while maintaining his forecast for "at most" one 0.5 percentage-point reduction by year-end.

Expansion target
Industrial production, fixed-asset investment and retail sales accelerated in October, signaling that economic growth will exceed Premier Wen Jiabao's 7.5 per cent target for his last year in office. China is confident it will achieve expansion this year of at least 7.5 per cent, Zhang Ping, head of the National Development and Reform Commission, said at a separate briefing in Beijing today.

At the same time, China's trade outlook is grim for the coming months and will be difficult next year, Chen said. Zhang said China needs to prepare for prolonged challenges including the debt turmoil in some countries and sluggish global growth while solving issues such as overcapacity.

Export gains have picked up from a one per cent pace in July and 2.7 per cent in August.

China's October import growth compared with the median estimate in a Bloomberg survey for a 3.4 per cent gain and a 28.7 per cent increase in October 2011. Inbound shipments in August recorded the first non-holiday drop since 2009. October's trade surplus compared with the $27.3 billion median forecast in the survey and a $27.7 billion excess in September.

Falling global commodity prices are contributing to the slowdown in import growth, Chen said. Iron ore imports in the first 10 months rose 8.9 per cent in volume while average prices slumped 20.8 per cent, the customs report showed. Copper imports by China, the world's largest user, declined to the lowest level in 15 months, according to the data.

Today's trade figures add to signs global demand is recovering after overseas shipments from South Korea and Malaysia unexpectedly rose and Indonesia's dropped less than estimated.

The yuan's gains against the dollar over the past three months may damp export growth. The currency has strengthened about 2.4 per cent since July 25 after a 1.6 per cent decline since the start of the year. The government has restrained increases for two weeks.

The MSCI Asia Pacific Index of stocks fell 0.4 per cent yesterday, taking the week's loss to about one per cent, as investors turned their attention to the US budget debate and the European Commission cut its growth forecast for the region. In China, the benchmark Shanghai Composite Index fell for the fifth straight day, taking its loss for the week to 2.3 per cent.

Growth momentum
The trade figures, "together with improving domestic demand indicators released yesterday, continue to support our view that China's growth momentum has picked up," Li-Gang Liu and Hao Zhou, China economists at Australia & New Zealand Banking Group, said in a note today.

Foreign trade expanded at a slower pace than last year in the first 10 months of the year, according to today's report, putting at risk the government's 2012 target of 10 per cent growth. Exports through October rose 7.8 per cent while imports gained 4.6 per cent, leaving a trade surplus of $180.2 billion.

Achieving the full-year target will be very difficult, Chen said today.

China's position as the world's biggest exporter is encouraging investment from logistics companies. FedEx Corp, the world's largest air-freight carrier, said last month it plans to build a $100-million-plus express-shipment facility in Shanghai to cope with rising exports from the nation. The company said the city's Pudong airport will probably become the world's busiest for cargo by 2015.

Debt turmoil
Europe's protracted sovereign-debt crisis is crimping exports to the bloc, China's biggest market last year. Sales to the 27-nation European Union fell for a fifth month in October and have dropped 5.8 per cent in the first 10 months of the year, compared with a jump of 16.3 per cent in the same period of 2011.

Exports to the US, the biggest buyer of Chinese goods this year, rose 9.5 per cent in the January-October period, compared with 14.6 per cent a year earlier, customs bureau data show.

"This year, exports are weak but they haven't collapsed like before," Andy Rothman, China macro strategist for CLSA Asia-Pacific Markets in Shanghai, said in a Bloomberg Television interview on November 8. "Right now it's a very small negative drag" on the economy.

The lack of "mass layoffs" similar to those during the 2008 global financial crisis explains "why we haven't seen a big stimulus," Rothman said.

The European Commission this week cut its 2013 growth estimate for the 17 nations that share the euro currency to 0.1 per cent from a May forecast of one per cent and lowered its projection for Germany to 0.8 per cent from 1.7 per cent.

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