MNI EXCLUSIVE: China Exports Seen Robust Till H2 2021:Advisors

China's exports could grow by double digits through at least the first half of next year driven by the demand-led recovery in developed markets and the slower rebound in competing manufacturing economies, which will counter the threat from an appreciating yuan and higher shipping costs, policy advisors told MNI.

Exports are likely to grow 10% year on year in November and December, maintaining last quarter's momentum, said Shen Jianguang, chief economist with JD Digits and former visiting scholar with the People's Bank of China.

There is still robust demand for personal protection equipment products in the wake of continued covid-19 infections and other items such as home appliances stemming from strong home sales in the U.S., according to Shen.

Exports of home appliances grew 9.7% y/y in the first 10 months, rebounding from the 2.8% decline in January-June, according to customs' data.

Shen and Tang Weijian, the chief macroeconomics analyst with state-owned Bank of Communications, think the pace of exports growth will hold through 2021 as global production capacity recovers at a slower pace than demand.

SHIPPING COSTS

China has an advantage in that its recovery is manufacturing-led whereas in Europe and the U.S., it is demand that recovers first, said Ming Ming, a former PBOC official and chief fixed-income analyst at state-owned Citic Securities. Since China has recovered from the pandemic faster than its manufacturing competitors, overseas buyers have to opt for Chinese products, Ming added.

An effective vaccine may allow the U.S., UK and other developed countries to recoup production capacity more quickly but that in turn will lift demand for products such as steel from China, said an advisor affiliated with a government think tank who requested anonymity as he is not authorised to speak to media.

China's competitors are mostly developing countries and they may not receive the vaccine until much later, Ming said. He also pegs China's November exports to grow 10% but sees momentum slowing in the second half of next year as competitors catch up.

While the strengthening yuan and surging shipment costs loom as risks, they are yet to make an impact on exports since demand is so strong, advisors said. The yuan has appreciated over 7% this year while shipping costs have nearly tripled. A shipbroker said costs may not come down as long as China remains the main source for products.