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China’s trade better than expected in November

CHINA’S foreign trade surprised the market and surged in yuan terms in November, revealing stronger external and domestic demand within the short term, data from the Customs showed today.

Yuan-denominated exports rose 5.9 percent year on year in November, beating market expectations for a drop of 1 percent, according to the General Administration of Customs.

Imports continued to pick up steam by jumping 13 percent year-on-year, exceeding expectations for a 5.6 percent increase.

The nation’s trading value totaled 2.35 trillion yuan (US$340 billion) last month with trade surplus narrowing to 298 billion yuan, the data showed.

In US dollar terms, exports snap 7-month losing streak to edge up 0.1 percent as imports rose 6.7 percent year-on-year, the most in 26 months.

Economists attributed the increase of exports stronger external demands, while imports were helped by recovering domestic economic momentum.

“November trade data surprised the market on the upside,” Li Jing, an economist with the HSBC said today. “The improvement in exports is mainly driven by better shipments to the developed markets such as the EU and the US. November import growth rose as ordinary imports picked up significantly. Imports of commodities continued to improve in both value and volume terms, signaling accelerating industrial and construction activity.”

Data from the Customs showed exports to European Union, China’s largest trading partner, were up 8.1 percent year-on-year last month.

Over the same periond, foreign shipment to the US rose 5.6 percent and that to Japan rose 3.3 percent.

Li said the data pointed to a modest recovery in both external and domestic demand, but the outlook remains more uncertain given potentially more protectionist US trade policy.

Cheaper yuan in November was also considered a driver for exports, according to Li.

The yuan weakened 1.66 percent against the US dollar within the month, widening from a 1.53 percent devaluation in October.

Economists with the Australia and New Zealand Banking Group wrote in a note that while increasing imports signaled improved domestic economy, the narrowing trade surplus leads to a decrease of foreign exchange inflow, adding pressure to the country’s ability to balance capital flows under yuan devaluation.

The trade data added signs of economic stability in China as earlier official data showed November’s official manufacturing Purchasing Managers' Index, an indicator of manufacturing activity, reached a two-year high of 51.7 points.

The expansion in services industry also accelerated in November at the quickest pace since June 2014 as the PMI for the services sector rose to 54.7 in November.

The Customs today said a forward-looking index of foreign trade rose 1.3 points from October to 36.9, indicating impoving export outlook early next year.

Exports have dragged on economic growth this year as global demand remains stubbornly sluggish, forcing policy-makers to rely on higher government spending and record bank lending to boost activity.

Weak exports knocked 7.8 percent off the country’s GDP growth in the first three quarters of the year.


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