Strong Trade Growth Buoys Chinese Economy

15 Oct 2014

An aerial picture shows the container pier at the Yangshan deep-water port outside Shanghai.

BEIJING—China’s exports and imports rose faster than expected in September, providing a modicum of good news in the world’s second-largest economy as Beijing aims to meet its 7.5% annual growth target.

Exports have been a rare source of economic strength in recent months fueled by growing global demand, even as weak real estate sales, industrial production and fixed-asset investment in China drag down growth.

China’s customs agency said Monday it expects stronger exports and imports to continue in the fourth quarter.

“These are very heartening numbers,” said ING economist Tim Condon. “It looks like exports have ratcheted up.”

The stronger-than-expected import figure also should allay fears that the domestic economy is decelerating too quickly, Mr. Condon added. “China’s big enough to help sentiment for the global economy. This is good news,” he said.

But economists said trade figures have been volatile, and it is too early to suggest that domestic demand in China is turning around.

Exports rose 15.3% in September from a year earlier, according to data from the General Administration of Customs.

September’s export growth exceeded August’s 9.4% growth and was higher than the median forecast of 12.5% by The Wall Street Journal’s poll of 15 economists. China’s exports have been rising since April as the U.S. economy started to pick up, along with demand from parts of Asia and Europe.

Imports in September rose 7% from a year earlier, following a 2.4% decline in August. Economists were forecasting a drop of 2.4%. The increased imports caused China’s trade surplus to narrow in September to $31 billion from $49.8 billion in August, which was below a median forecast for the surplus of $42 billion.

Customs spokesman Zheng Yuesheng attributed September’s strong exports to the government’s targeted support measures, reduced red tape and continued economic recovery abroad. Some analysts, including CMB economist Fan Zhang, also said demand for the iPhone 6 may have played a role in the higher-than-expected import and export figures.

Mr. Zheng said China is losing its competitive advantage as costs rise. Foreign investors from advanced economies—which are linked to nearly half of the nation’s exports—are investing less in the manufacturing sector, he said, which would curb exports in the medium term. Falling commodities prices have also been a drag on import growth as measured in dollar terms, Mr. Zheng added.

“Regardless of the challenges, we expect exports and imports will likely continue to improve in the fourth quarter,” Mr. Zheng added.

“It is indeed very difficult to achieve the 7.5% total trade growth target for this year, but I’d like to stress that China’s trade has been improving quarter from quarter,” he said. “The growth target is indeed important, but medium-to-high growth rates have become the ‘new norms’.”

In a survey by the General Administration of Customs in September, 34% of exporters polled reported an increase in new orders, up 4.6 percentage points from the previous month, while 32.4% of the companies said they were optimistic about the exports outlook over the next two or three months, a rise of 6.9 percentage points.

—Liyan Qi and Mark Magnier

SOURCE: The Wall Street Journal, 14 October 2014.