China´s trade surprises on upside

Dow Jones – China's exports and imports showed surprising strength in November, underpinned by a recovering global economy and resilient domestic demand.

Exports were up 12.3% from a year earlier, the General Administration of Customs said, accelerating from October's 6.9% pace and well above the 6% economists had expected.

“The figure showed strong growth momentum in China's export sector that was buoyed by robust demand from Europe and the US," said Zhang Ning, an economist with UBS.

Upswing

The upswing in global demand has meant nine straight months of rising Chinese exports, a significant factor in the country's higher-than-expected economic growth in the first three quarters – after two years in which weak exports were a drag on growth. Global demand is expected to continue supporting the Chinese economy in 2018, giving Beijing more leeway for structural reforms including financial deleveraging, said Zhang.

But he also warned of risks from US-China tensions, as the trade gap between the two broke $25bn for the sixth straight month. China's trade surplus with the US widened to $27.87bn in November from $26.62bn in October.

It accounted for nearly 70% of China's total trade surplus with all its trading partners, which widened to $40.21bn from $38.2bn the previous month. The median forecast was $34.2bn.

Economists expect this year's US-China trade gap to exceed last year's – $347bn, according to US figures. It is by far the largest between the US and any of its trading partners.

Protectionism

The continued widening is expected to trigger more protectionist moves.

Last month, the US formally rejected China's bid at the World Trade Organisation to be treated as a “market economy,” which the EU also opposes. Economists have estimated that China's nonmarket status, which makes it easier for trading partners to impose tariffs, has cost its businesses billions of dollars in exports. Some goods face tariffs well above 100%.

Also in November, the US decided to impose anti-dumping duties on Chinese aluminium foil. The Trump administration earlier this year launched a probe over intellectual-property theft by Chinese companies and Beijing.

China's imports in November were up 17.7% from a year earlier, slightly ahead of October's 17.2% pace, driven by rising commodities costs and domestic demand. The median forecast was 12%.

China's imports have been growing at a double-digit pace since January, but economists said the rise may not last.

“We expect exports to continue to perform well in the coming months on the back of strong global demand,” said Julian Evans-Pritchard, an economist with Capital Economics. “However, we are sceptical that the strength of imports can be sustained given that the delayed impact of policy tightening and a cooling property market are set to weigh on Chinese demand for commodities in coming quarters.”