Chinese trade numbers provide positive news
Chinese exports and imports in August both surprised on the upside despite concerns about a slowing global recovery and supply bottlenecks. The Chinese trade surplus continued to widen in August.
Chinese exports rose 25.6% year-over year (y-o-y) in August, compared to 19.3% in July and the consensus forecast of 17.3%. To mitigate the base effect distortion related to the covid shock, we can look at the two-year average growth rate for Chinese exports. This stood at 17.0% in August, up from 12.9% in July and 15.1% in June. The August figure is especially striking as it was achieved just as the most widely-spread resurgence of covid cases in China since the original outbreak in early 2020 led to the closure of the Ningbo Zhoushan port (the world’s busiest) for two weeks.
Two factors may have contributed to the stellar export growth in August: solid demand from developed economies, especially as we head towards the year-end holiday season, and the diversion of export orders from ASEAN economies due to the on-going covid crisis in Southeast Asia. For example, Vietnamese exports dropped by 5.4% y-o-y in August.
Looking forward, we expect Chinese exports to remain supported in the near term by: 1) solid demand in developed countries ahead of the end-of-year holiday season; 2) dealing with the backlogs caused by the two-week closure of the Ningbo Zhoushan port in mid-August; and 3) continued order re-routing from Southeast Asia given continued covid challenges there. However, momentum may start softening when we head into 2022 as these tailwinds fade and demand for Chinese goods normalises.
China’s import growth also beat expectations in August, coming in at 33.1% y-o-y (beating consensus forecasts of 26.9%). While the nominal import numbers are flattered by high commodity prices, Chinese imports in real terms still grew significantly in August. In particular, the rise in imports of some key industrial commodities may point to an improvement in domestic demand in China.