China: External demand remains key – UOB

Economist at UOB Group Ho Woei Chen, CFA, assesses the recent export/import data in the Chinese economy.

Key Quotes

“China’s export and import growth were both above expectation in June, lifting sentiment ahead of the release of 1Q21 GDP on Thursday as external demand has remained a key driver for China’s economy. This will help to offset a slower recovery in domestic demand.”

“In USD-terms, export growth strengthened to 32.2% y/y (Bloomberg est: 23.0%; May: 27.9%) while import growth moderated to 36.7% y/y as the favourable base effect eased (Bloomberg est: 29.5%; May: 51.1%). Trade surplus was at its highest in five months at US$51.53 billion in June, up from US$45.54 billion in May.”

“The recovery in global demand saw China’s trade surplus up sharply to US$251.52 billion in 1H21 from US$164.33 billion in year-ago period. Of this, around two-thirds or US$164.92 billion was trade surplus with the US, up from US$120.90 billion in the year-ago period.”

“Exports to Hong Kong (+43.1% y/y), South Korea (+36.4% y/y) and EU (+27.2% y/y) picked up from the preceding month while moderating slightly in ASEAN (+33.1% y/y) and the US (+17.8% y/y). US remains the largest export market for Chinese goods, accounting for 16.7% of total exports.”

“Imports remained buoyant across China’s key sources in June despite some moderation. Highest growth rates were seen in Hong Kong (+72.4% y/y), Italy (+60.9% y/y) and Australia (+53.5% y/y). Imports from the US (+37.6% y/y), EU (+34.1% y/y) and ASEAN (+33.7% y/y) also moderated in June.”