China reported much stronger-than-expected exports for October as shippers rushed goods to the United States, its biggest trading partner, racing to beat higher tariff rates due to kick in at the start of next year. Import growth also defied forecasts for a slowdown, suggesting Beijing’s growth-boosting measures to support the cooling economy may be slowly starting to make themselves felt.
The upbeat trade readings from China offer good news for both those worried about global demand and for the country’s policymakers after the economy logged its weakest growth since the global financial crisis in the third quarter.
October was the first full month after the latest U.S. tariffs on Chinese goods went into effect on Sept. 24, in a significant escalation in the tit-for-tat trade battle.
But analysts continue to warn of the risk of a sharp drop in U.S. demand for Chinese goods early in 2019, with all eyes now on whether presidents Donald Trump and Xi Jinping can make any breakthroughs on trade when they meet later this month in Buenos Aires.
China’s exports rose 15.6% last month from a year earlier, customs data showed on Thursday, picking up from September’s 14.5% and beating analysts’ forecasts for a modest slowdown to 11%.
Washington has vowed to hike the tariff from 10% to 25% at the turn of the year, while Trump has warned that if talks with Xi are not productive, he could quickly slap tariffs on another US$ 267 billion in Chinese imports.
Despite several rounds of U.S. duties this year, China’s exports have been surprisingly resilient as firms ramped up shipments before even tougher measures went into effect.
Container ship rates from China to the U.S. West Coast remain near record highs, suggesting shipments will remain solid well into November and possibly early December. China’s exports to the U.S. rose 13.2% from a year earlier in October.
In another positive sign, China’s exports by volume also showed solid growth, according to Oxford Economics, which estimated they rose “an impressive” 9.9%.
But analysts say robust export readings won’t last much longer, noting Chinese factory surveys have been showing contracting export orders for months. U.S. orders for Chinese goods at the latest Canton fair dropped 30.3% from a year earlier by value, as higher U.S. tariffs made goods from batteries to farm tractors more expensive.
For the first 10 months of the year, China’s surplus with the United States, its largest export market, totaled US$ 258.15bn, widening sharply from US$ 222.98bn in the same period last year.
While the monthly surplus has eased somewhat to US$31.78bn in October from a record US$ 34.13bn in September, it remains elevated by historical trends.
While China’s exports are expected to falter soon, its imports, especially commodities, could remain strong for months to come as Beijing rolls out more measures such as infrastructure spending to boost domestic demand, economists at ANZ said.
Imports for October quickened to 21.4% from 14.3% in September. China’s crude oil imports in October rose to all-time high as private refiners rushed to stock up ahead of winter, while demand for copper and iron ore was also solid though down from September levels.
China cut import taxes on more goods including machinery from Nov. 1, on top of reductions implemented earlier this year, to reduce costs for consumers and companies.