China: Downward export surprise in September – ING
|The second consecutive year of a narrowing trade surplus and appreciating CNY policy should deflect the US Treasury’s attention away from China’s FX policy, suggests the analysis team at ING.
Key Quotes
“September exports surprised on the downside with 8.1% YoY growth (INGF: 8.6%, consensus: 10.0%, prior 5.6%). The year-to-date growth, also 8.1% YoY, was up from -8.6% year ago yet still an underperformance among Asian economies. Part of the blame could lie with the structural shift in China’s manufacturing, especially the drive to reduce excess capacity in sectors such as coal and steel, while China also seems to be losing its lustre as the world’s factory. Machinery and transport equipment have historically been China’s main export drivers, accounting for about a half of all goods exports.”
“Weak Chinese exports were at odds with strong bounce observed in exports from Korea and Taiwan in the last month whose dominant export destination has been China. As such, China’s 18.7% import growth in September, although well above expected (INGF: 13.5%, consensus: 14.7%), doesn’t come as a real surprise. The 17.4% YoY YTD import growth was even a bigger positive swing (than exports) from -8.3% a year ago. The trade surplus of US$303bn in the first nine months of the year was US$76bn narrower than year ago.”
“As well as reflecting structural shifts and strong domestic demand, China’s narrowing trade surplus may also reflect its position in the regional production of next generation flagship smartphones. China tends to be located further down the production chain than, say, Korea or Taiwan, whose components outflows are pushing up exports in these economies. As we near the West’s holiday season, the export of finished handsets from China is likely to pick up, whilst we may see exports of integrated circuits easing back, helping China to play catch-up on trade with other Asia economies.”
“A silver lining in China’s second consecutive year of narrowing trade surpluses is that it should deflect the US Treasury’s attention from China as a potential currency manipulator in its October report. Our Greater China economist Iris Pang forecasts USD/CNY at 6.50 by end-2017 (spot: 6.59, consensus: 6.65) and further 4.5% appreciation in 2018.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.