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December 9, 2016

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Surprise surge in foreign trade

CHINA’S foreign trade surged in yuan terms in November, indicating stronger external and domestic demand, at least in the short term, according to data released by the General Administration of Customs yesterday.

Yuan-denominated exports rose 5.9 percent year on year in November, compared to the decline of 1 percent that the market had been expecting.

Imports continued to pick up by jumping 13 percent year on year, again exceeding expectations, this time for a 5.6 percent increase.

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

In US dollar terms, exports broke a seven-month losing streak to edge up 0.1 percent while imports rose 6.7 percent, the most in over two years.

“November trade data surprised the market on the upside,” said HSBC economist Li Jing.

“The improvement in exports is mainly driven by better shipments to developed markets such as the EU and the US,” Li said. “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.”

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

Over the same period, shipments to the United States rose 5.6 percent and those to Japan were up 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 the potential of a more protectionist US trade policy.

The cheaper yuan in November was also considered a driver for exports, Li said.

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

In a note, economists with the Australia and New Zealand Banking Group said that while rising imports signaled an improved domestic economy, the narrowing trade surplus was leading to a decrease in foreign exchange inflow, adding pressure to the country’s ability to balance capital flow under yuan devaluation.

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

The expansion in the services industry also accelerated in November, rising at its quickest pace since June 2014 with the PMI for the sector rising to 54.7 last month.

The Customs said yesterday that an index predicting future trade growth prospects began to rise again in November, climbing by 1.3 points from the previous month, indicating an improving export outlook for early next year.

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


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