China Sep Trade Surplus Eases To 6-Month Low On Import Surge

--Export Growth Below Expectations But Still Strong

     BEIJING (MNI) - Data released Friday by the General Administration of

Customs:

                   Balance (bln $)  Exports Y/Y %  Imports Y/Y %

----------------------------------------------------------------

September                    28.47            8.1           18.7

MNI Survey Median            37.30            9.6           14.0

Previous                     41.99            5.5           13.3

     FACTORS:

--China Sept. Seasonally Adj. Exports +4.4% m/m VS -1.5% Aug.

--China Sept. Seasonally Adj. Imports +11.9% m/m VS -0.9% Aug.

--China Sept. Seasonally Adj. Exports +5.9% y/y VS +4.0% Aug.

--CHINA Sept. Seasonally Adj. Imports +13.6% y/y VS +13.3% Aug.

     TAKEAWAY: Chinese imports and exports grew at a faster pace in September,

although exports fell below expectations. The significant acceleration in

imports indicated that domestic demand is still robust, while diverging

expectations on the yuan exchange rate continued to drag on exports.  

     According to the General Administration of Customs, September exports rose

8.1% year-on-year, the highest since July's 11.3% gain. The September gain

followed two straight months of declines.

     Exports were above the 5.5% gain in August, but below the MNI median

forecast for a 9.6% rise. 

     Although the yuan exchange rate fell 0.76% against the greenback in

September, compared with a 1.96% appreciation in August, diverging market

expectations about the yuan impacted exports. They were still robust in general,

though, with exports to China's three biggest customers -- the United States,

European Union and Japan -- all showing solid momentum. 

     Exports to the U.S. rose 13.8% year-on-year to $40.94 billion, the highest

level since June and significantly higher than the 8.1% decrease in September

2016. Exports to the European Union grew 10.5% to $31.90 billion, compared with

a 9.8% decrease last September. Exports to Japan equaled their growth level of

last September -- 11.83%. 

     The overall export acceleration was in line with the official CFLP PMI new

export orders index, which jumped to 51.3 last month from the previous 50.4. 

     "Since August, the global economy has stepped into a recovery stage, and

manufacturing PMIs in the main countries have all started to rebound, so exports

should maintain a strong trend," Deng Haiqing, chief analyst with Jiuzhou

Securities, told MNI.

     Imports increased 18.7% year-on-year in September, higher than the MNI

median forecast for a 14% gain and also up from the 13.3% rise in August.

     "The rising prices of commodities pushed up the growth of imports, and the

improvement of the domestic real economy also played a positive role," Huang

Songping, spokesman of the General Administration of Customs, said at a press

conference on Friday. 

     Imports of iron ore increased 16% month-on-month in August, with China

importing 102.83 million tons of iron ore, compared with 88.66 million tons in

August. Coal imports rose 7.2% m/m to 27.08 million tons. 

     The growth of imports contrasted slightly with the latest official CFLP

manufacturing PMI index. According to the National Bureau of Statistics, the

import sub-index fell to 51.1 from the previous 51.4.  

     "The unexpected growth of imports was likely due to companies' increased

inventories of raw materials before the 19th Party Congress, and rising

commodities prices made manufacturers add inventories while worrying the

increase of producing cost," Deng explained.

     The import growth rate continued to outpace the export growth rate in

September, the 14th consecutive month it has done so, but absolute exports

exceeded imports, resulting in a $28.47 billion trade surplus. The surplus was

lower that the MNI survey median forecast of $37.30 billion, and also much lower

than August's $41.99 billion surplus. It was also the lowest level in six

months. 

     In the first three quarters of this year, the trade surplus amounted to

$295.58 billion, below the $396.36 billion surplus in the same period last year,

with exports rising 7.5% y/y and imports up 17.3% y/y.

     "Overall, in the first three quarters, imports and exports remained sound

and steady and witnessed positive changes, with an improvement in quality and

effectiveness," Huang said.

     "But in the fourth quarter, unstable and uncertain factors will still

effect the foreign trade environment, including stronger protectionism, the

diverging monetary policies of main economies and more complicated geopolitics,"

Huang noted. "The fierce competition in the international market due to

manufacturing goes back to developed countries and the low-end manufacturing

boom in new economies."

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

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