Chinese exports and imports both grew more than expected in October, the first full month of data since the latest US tariffs went into effect.
Exports rose 15.6 per cent last month compared to a year earlier, according to data released by the General Administration of Customs on Thursday.
This was an acceleration from September’s 14.5 per cent gain and higher than the median forecast of an 11.7 per cent rise by economists in a Bloomberg survey.
Imports also beat expectations, jumping to 21.4 per cent, up from 14.3 per cent in September and well above the Bloomberg median forecast of 14.5 per cent.
China’s total trade surplus rose to US$34.01 billion for October from September’s US$31.69 billion, but was below the median forecast of US$35 billion.
However, its surplus with the US fell to US$31.78 billion in October, down from a record high of US$34.13 billion in September. Chinese exports to the US rose 13.2 per cent, but imports from the US fell 1.8 per cent as the higher tariffs imposed by China have put off local importers.
The data shows the trade war with the US is having only a modest impact on Chinese trade, at least so far. However, economists expect the trade war’s impact to increase early next year, especially if the US goes ahead with the planned increase in tariffs from the beginning of 2019.
In addition to the impact of US advance orders, stronger than expected global demand – driven by emerging markets such as Russia and Brazil – had also boosted Chinese exports in October, according to a note published by Nomura.
“We believe front-loading activity continued in October and will extend into the last two months of 2018 as exporters hurry their shipments in anticipation of higher tariff rates in 2019,” Nomura said.
A weaker yuan has also helped the country’s exporters, making their products cheaper compared to other producers. Between April and the end of October, the yuan lost 11.4 per cent against the US dollar.
The Foreign Trade Centre, which organised last month’s Canton Fair, said on Monday that export orders to the US declined 30.3 per cent from a year earlier by value.
Liu Liu, analyst at Chinese investment banking firm CICC, said the risk of slowing export growth was higher now than before, based on the latest manufacturing purchasing managers index (PMI).
The PMI, which gives a snapshot of operating conditions in the manufacturing sector, dipped to 50.2 in October – just above the dividing line of 50 between expansion and contraction.
However, the PMI sub-index, which measures new export orders, dropped for the third consecutive month to 46.9 in October, the lowest reading since January 2016.
“There is still a lot of uncertainty about the trade friction between China and the US,” said Liu.
While China’s exports might be hit by the trade war, imports are likely to grow, according to Louis Kuijs, head of Asia economics at Oxford Economics
“The October trade data underscores that, as China’s domestic economy continues to grow substantially faster than that of its trading partners, its imports tend to outpace exports,” Kuijs said in a note.
“We expect this trend to continue in the coming years, supported by the trade conflict with the US and reduction in Chinese import tariffs.”
Chinese President Xi Jinping pledged on Monday to buy more goods and services from abroad, saying China’s total purchases of foreign goods would amount to US$30 trillion over the next 15 years.
Speaking at China’s first imports expo in Shanghai, Xi also announced the country would buy US$10 trillion worth of foreign services in the same period.
With no clear resolution of the trade conflict on the horizon, Beijing is increasingly nervous about the outlook for the economy, which grew 6.5 per cent in the third quarter, the slowest pace in a decade.
China’s growth is likely to slow further in the coming months as the trade war takes its toll.
In response, the government launched a series of measures to support the economy, including cutting individual taxes, speeding up infrastructure spending and extending additional financing options to help struggling smaller companies.
But analysts said these measures would only be effective if rolled out quickly.
“From the introduction of the policy to actual implementation, there is a delay in execution,” said a note from the Bank of Communications analysis team, led by chief economist Lian Ping.
“[This delay] will have an impact on the production of import and export enterprises.”
This article China’s exports higher than expected as shippers rush to beat next round of trade war first appeared on South China Morning Post