Sonali Ray, writer
Brief news
- China’s September trade data showed exports rose by 2.4% and imports by 0.3%, both below analyst expectations, raising concerns about economic growth.
- Domestic demand remains weak, with a core consumer price index increase of only 0.1%, the slowest since February 2021.
- Analysts predict challenges for exports due to trade tensions and anticipate a rebound in imports driven by increased fiscal expenditure.
Detailed news
BEIJING— Concerns have been raised over one of the few bright spots in the world’s second largest economy given that China’s exports and imports both failed to meet forecasts in the month of September.
Exports increased by 2.4% in September compared to the same month a year earlier in terms of the United States dollar, while imports increased by 0.3%. The data was released by Customs on Monday.
Analysts had anticipated a more rapid expansion. It was projected that China’s exports would have increased by 6% year-on-year in September in terms of the United States dollar, while the country’s imports were anticipated to have registered a 0.9% year-on-year jump in the same month, according to surveys conducted by Reuters.
In recent years, China’s economy has been significantly impacted by a real estate downturn and lackluster consumer spending, despite the fact that exports have been a significant driver of growth.
However, Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, stated in a note that China’s exports will encounter challenges in maintaining their robust growth trajectory into the upcoming year due to the intensification of trade tensions. “The press conference held over the weekend, which signaled a shift in fiscal policy, is a critical pillar for growth in the upcoming year.”
Among other products, the United States and the European Union have implemented tariff increases on electric cars manufactured in China.
According to CNBC’s analysis of official data, China’s exports to the United States, its largest trading partner, increased by 2.2% in September compared to the previous year, while imports from the United States increased by 6.7%.
Zichun Huang, a China economist at Capital Economics, stated in a note on Monday that import volumes decreased last month. However, he anticipates that they will rebound in the short term as the demand for industrial commodities is stimulated by increased fiscal expenditure.
Huang stated, “We anticipate that the finance ministry’s increase in fiscal expenditure will stimulate construction activity and increase demand for industrial commodities, at least for the next quarter or two.”
On Saturday, the Ministry of Finance of China had suggested that it intended to increase the fiscal deficit; however, it did not specify the extent of this support at the time.
Exports to the Association of Southeast Asian Nations, China’s largest regional trading partner, increased by 5.5%, while imports increased by 4.2%. China’s exports to the European Union increased by 1.3%, while imports decreased by 4%.
According to the analysis, China’s exports to its BRICS partner, Russia, increased by 16.6%, while imports decreased by 8.4%.
In September, China’s aggregate exports of automobiles experienced a 25.7% year-on-year increase, while those of smartphones, toys, and shoes experienced a decline during the same period. Home appliances, integrated circuits, and ships were among the categories that experienced export growth.
In September, China’s petroleum oil imports decreased by 10.7% in U.S. dollar terms in comparison to the same period last year, indicating a further indication of weak domestic demand. Conversely, imports of natural gas and coal increased.
Beijing’s most recent data demonstrated its initiatives to enhance national security by increasing access to rare earths and food supplies. In September, China’s rare earths trade experienced an additional decline, with exports plummeting by over 40% from the previous year and imports decreasing by approximately 9%.
The consumption of legumes, a significant component of livestock fodder, increased by nearly 39%.
Inadequate demand
The inflation report released on Sunday indicates that domestic demand is further weakened, which contributes to a bleak picture of the Chinese economy.
September’s core consumer price index, which excludes volatile energy and food prices, increased by 0.1% from the previous year. The Wind Information database indicates that this is the weakest pace since February 2021. Despite the Mid-Autumn Festival in September and the Golden Week holiday that commenced on October 1, tourism-related prices experienced a 2.1% year-over-year decline.
The third-quarter GDP data, as well as retail sales, industrial production, and fixed asset investment for September, are expected to be released by China’s National Bureau of Statistics on Friday.
Since late last month, Chinese authorities have increased the frequency of stimulus announcements; however, they have yet to provide the fiscal policy details that many investors have anticipated. As the ultimate consequences of Beijing’s economic assistance are debated by markets that have been severely battered, stocks in China have fluctuated significantly.
Source : CNBC News
