China: Chinese export growth improved further (W. Yao)

Eco Analysis - Chinese export growth improved further (W. Yao)

China's export growth surprised on the upside again, but imports remained sluggish.
China's export growth rose further to +11.6%yoy in October from +9.9%yoy in September, beating expectations (Cons. +10%; SG +9%) for a second month. There were two more workdays last month than that in October 2011, which contributed to the headline improvement. But, even if excluding this factor, exports still hold up reasonably well. Export growth to the US and the European Union improved to +9%yoy and -8.1%yoy in October from +5.5yoy and -10.7%yoy in the previous month, previously. As in September, emerging Asia outperformed the most, with exports to ASEAN economies rising 44%yoy. However, we remain cautious on the export outlook, amid weak order figures, especially those from the Canton fair (-9%yoy).

Meanwhile, import growth was largely flat at +2.4%yoy, below expectations (Cons. +3.4%; SG +3%). Given the reflation of commodity prices in yoy terms, we estimated that import volume actually decelerated in October. Import volume of copper remained on a downward trend, and demand for iron ore continued to move sideways. This is consistent with lack of recovery in manufacturing investment so far, due to high inventory levels and excess capacity. In addition, car imports were still affected by geopolitical tensions and contracted 26.4%yoy and nearly 40% from the level in August.

As a result of the positive surprise from exports, the trade surplus expanded further to a 45-month high of USD 32bn in October, which probably was one of the reasons behind the yuan strength recently.