China’s exports increased for the first time in 6 months, a relief for factories

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An aerial view shows containers and cargo ships at the port of Chengdu in China’s Shandong province on May 9, 2022. The picture was taken from a drone. China Daily obtain licensing rights via Reuters/File photo

BEIJING, Dec 7 (Reuters) – China’s exports rose for the first time in six months in November, suggesting factories in the world’s second-largest economy are recovering from a prolonged decline in demand through discount pricing. Attracting buyers.

Mixed manufacturing data for November kept alive calls for further policy support to boost growth, but also raised questions about whether the mainly negative sentiment-based surveys masked the improvement in conditions.

Customs data on Thursday showed exports rose 0.5% in November from a year earlier, compared with a 6.4% decline in October and surpassing the 1.1% decline expected in a Reuters poll. Imports fell 0.6%, missing forecasts for a 3.3% rise and swinging from a 3.0% rise last month.

“The recovery in exports is broadly in line with market expectations… Sequential growth in China’s exports has strengthened over the past few months,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “There have also been positive signs in export data from other Asian countries in recent months.”

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The Baltic Dry Index, an indicator of global trade, hit a three-year high in November, supported by a recovery in demand for industrial goods, particularly from China.

South Korean exports, another gauge of the health of global trade, rose for the second consecutive month in November, led by chip exports, which broke a 15-month decline.

Trade with China’s key peers also painted a rosy picture, with exports to the United States, Japan, South Korea and Taiwan down in October.

export rebate

However, in the short term, the pressure on Chinese manufacturers shows no signs of easing completely.

China’s official Purchasing Managers’ Index (PMI) showed last week that new export orders fell for the ninth straight month, while a private sector survey highlighted the struggle of factory owners to attract foreign buyers for the fifth straight month.

“While export volume levels reached a new high, (they) were supported by exporters lowering prices,” said Zichuan Huang, China economist at Capital Economics.

“We doubt this strength will last,” Huang warned, “as exporters will not be able to continue cutting prices for much longer.”

Factory gate prices fell for the second month in November in the official PMI, while input costs rose for the fifth consecutive month.

Still, some analysts point to faster-than-expected growth in the third quarter and mostly upbeat data from October to argue that recent hard data paint a less gloomy picture of the Asian giant’s economic health than sentiment-based surveys. . , He says concrete data also shows that support measures from Beijing since June have had some impact.

“The data shows that foreign demand is stronger than we thought and domestic demand is weaker than we thought,” said Dan Wang, chief economist at Hang Seng Bank China. “The largest export items are still electrical machinery and cars, so demand in Europe and Russia will have boosted outbound shipments.”

uneven recovery

Analysts say it is too early to tell whether the recent policy support will be enough to boost domestic demand and how sustainable any pick-up in foreign demand is, given the lack of a permanent bounce back domestically due to weak property levels, unemployment and weak household and business confidence. There is doubt.

In November the International Monetary Fund upgraded its China growth forecasts for 2023 and 2024 by 0.4% percentage points, but this came from a lower base. And Moody’s on Tuesday warned of downgrading China’s A1 credit rating.

Chinese markets appeared to reflect that caution, with the yuan softening against the dollar after the data, while the country’s blue chip CSI300 stock index fell 0.44% and Hong Kong’s Hang Seng fell 1.46%.

China’s crude imports fell 9.2% year-on-year in November, the first annual decline since April as high inventory levels and poor manufacturing activity hit demand for products such as diesel. But last month the import of iron ore increased slightly.

“Although export demand has improved, it is not clear whether exports can contribute as a growth pillar next year,” warned Pinpoint Asset Management’s Zhang.

“The European and United States economies are cooling. China still needs to rely on domestic demand as the main driver of growth in 2024.”

Reporting by Joe Cash, Editing by Sri Navaratnam

Our Standards: The Thomson Reuters Trust Principles.

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Joe Cash reports on China’s economic affairs, including domestic fiscal and monetary policy, key economic indicators, trade relations, and China’s growing partnerships with developing countries. Before joining Reuters, he worked on UK and EU trade policy in the Asia-Pacific region. Joe studied Chinese at Oxford University and is a native Mandarin speaker.

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