October Trade Mixed Bag, Import Recovery Hints At Firming Domestic Demand

China Oct trade figures presented a mixed bag. Exports were weaker than expected at -6.4% y/y (-3.5% forecast and prior -6.2%). Imports surprised on the upside though, +3.0%y/y, versus -5.0% forecast and -6.3% prior. This left the trade surplus much narrower than forecast at $56.53bn ($82bn forecast).

• The export result follows tentative signs of improving external demand, particularly in economies like South Korea and Taiwan. Export headwinds come at a time when domestic demand is not on a firm footing (although import data suggests some improvement on this front, see below).
• All else equal the authorities are likely to be cautious around CNY NEER. However, as the chart below highlights, the y/y change in the NEER and export growth are reasonably well aligned at this stage.

Fig 1: CNY NEER Y/Y Versus China Export Growth

Source: MNI - Market News/Bloomberg

• On the import side we comfortably surprised on the upside. All else equal this bodes well for the domestic demand backdrop. BBG noted that October monthly imports only fell modestly, which was a resilient result given holidays in the month.
• The second chart below overlays import growth against spot commodity prices moves in y/y terms.
• In terms of commodity import volumes, oil and copper rose, but were down for iron ore, coal and natural gas.

Fig 2: China Import Growth & Global Spot Commodity Prices Y/Y

Source: MNI - Market News/Bloomberg