China’s Exports Expectations Beats Amid Energy Shortage

China’s Exports Expectations

 

China’s export growth unexpectedly accelerated in September as still strong global demand offset some of the pressures on factories from power shortages, supply bottlenecks, and a resurgence of domestic COVID cases. -19.

The world’s second-largest economy has seen an impressive rebound from the pandemic, but there are signs that the recovery is losing steam. Issues including falling manufacturing activity, persistently weak consumption, and a slowdown in the real estate sector have clouded China’s economic outlook.

Outbound shipments in September increased 28.1% year-over-year, compared to a 25.6% increase in August. Analysts polled by Reuters had forecast growth to slow to 21%. We hope that the energy rationing in mid-September has not yet affected exports,” said Ting Lu, Nomura’s chief economist in China.

Lu said that a high base of comparison and falling demand for durable goods, as more countries spend on services as they adopt a strategy of living with COVID-19, will also be buffer factors “We expect overall year-on-year export growth to slow first moderately in October and then drop significantly in November and December to around 10%.”

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Power shortages caused by a transition to clean energy, strong industrial demand, and high prices for raw materials have halted production at numerous factories, including many supplier companies such as Apple and Tesla since late September.

Recent data point to a slowdown in productive activity. China’s manufacturing PMI unexpectedly contracted in September as industrial companies struggled with rising costs and electricity rationing.

In addition, the real estate sector, a key driver of growth, is rebounding from growing defaults by Chinese developers, with real estate sales falling and new construction slowing China’s imports in September rose 17.6%, behind an expected increase of 20% in a Reuters survey and growth of 33.1% the previous month.

“Given the large increase in import prices, that means import volumes were down last month from last year, as demand in China’s economy slowed down considerably,” said Louis Kuijs, chief economics officer of Asia in Oxford Economics China’s energy demand is increasing rapidly.

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The volume of coal imports in September rose to its highest level this year as power plants scrambled to find fuel to boost electricity generation to alleviate power shortages and replenish inventories ahead of the heating season. wintry.

Natural gas imports in September also rose to their highest level since January this year China posted a trade surplus of $ 66.76 billion in September, compared to the survey forecast for a surplus of $ 46.8 billion and a surplus of $ 58.34 billion in August.

Many analysts expect the central bank to inject more stimulus by cutting the number of cash banks must hold as reserves later this year to help small and medium-sized businesses China has largely contained coronavirus outbreaks fueled by the more infectious Delta variant, but analysts say the country’s “zero tolerance” COVID-19 policy and stretched international shipping capacity could be constraints.

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China’s trade surplus with the United States rose to $ 42 billion, Reuters calculations based on customs data showed, up from $ 37.68 billion in August Last week, top U.S. and Chinese trade officials reviewed the implementation of the U.S.-China Economic and Trade Agreement.

The United States has been pressuring China to keep its commitments under a “Phase 1” trade deal that has eased a long-running tariff war between the world’s two largest economies. The Phase 1 agreement will expire at the end of 2021.