China’s Trade Slump Falls, Raising Recovery Optimism

China released a mixed batch of economic data on Friday showing a slump in exports and imports was gradually easing, but lingering deflationary pressures underlined the challenges policymakers face in trying to engineer a stronger economic recovery.

China's policy support measures over recent months have begun to stabilise some parts of the world's second-biggest economy, but a long-running property crisis, a slowdown in global growth and geopolitical tensions continue to drag on broader activity as well as consumer and business confidence.

Exports in September declined 6.2 per cent from a year ago, moderating somewhat from a drop of 8.8 per cent in August, and beating economists' forecast for a 7.6 per cent fall in a Reuters poll.

The trend appeared to be backed up by new export orders in an official factory survey two weeks ago which showed improvement last month, partly because of a peak export shipping season for Christmas products and favourable base effects.

"There's increasing evidence that the cyclical upturn in the global electronics sector is driving a bottoming-out of global trade and China's trade data is the latest sign," said Xu Tianchen, senior economist at the Economist Intelligence Unit.

"This gives reason for optimism about a rosier trade picture in 2024," he added.

South Korean exports to China, a leading indicator of China's imports, fell at their slowest pace in 11 months in September. Semiconductors make up the bulk of their trade, signalling improving appetite among Chinese manufacturers for components to re-export in finished goods.

Global trade activity, represented by the Baltic Dry Index, also reported notable growth in September.

However, Lv Daliang, spokesperson of the General Administration of Customs, said at a press conference on Friday that China's trade still faces a complex and severe external environment.

China's exports to the ASEAN nations, which have become the Asian giant's largest trade partner amid rising tensions with the United States and Europe over trade, technology and geopolitics, contracted further in September from a month earlier.

Elsewhere, China's commodities data also presented a mixed picture. Its crude oil imports in September grew nearly 14 per cent from a year earlier, while imports of copper - used widely in the construction, transport and power sectors - fell 5.8 per cent year-on-year.

Overall, though, total merchandise imports fell at a slower pace, down 6.3 per cent, reflecting a gradual recovery in domestic demand. They missed the 6 per cent decline forecast in the poll but came in better than a 7.3 per cent contraction in August.

That resulted in a broader trade surplus of USD 77.71 billion in September, compared with a USD 70 billion surplus expected in the poll and USD 68.36 billion in August.

Stocks in China largely tracked falls overseas, with the blue-chip CSI300 Index falling 1 per cent, as global markets fretted over stronger-than-expected US inflation data and concerns the Federal Reserve will keep interest rates higher for longer.

(REUTERS)