China’s November Exports Surprisingly Strong, as Imports Grow Modestly

(December 8, 2013 - by Richard Silk)

China Posts Biggest Trade Surplus in Nearly Five Years, Possibly Irking the U.S.

BEIJING— China posted its biggest trade surplus in almost five years on Sunday, as soaring exports ran ahead of modest import growth, potentially resurrecting a source of friction with the U.S.

In November, China’s trade surplus rose to $33.8 billion from $31.1 billion the month before. Exports staged a rebound, rising 12.7% from November last year, well ahead of October’s 5.6% growth. That is a positive sign for the global economy as well as China, experts said.

But imports grew a more modest 5.3% year-over-year, aggravating the trade surplus that has become a source of contention between China and the U.S.; A persistent trade surplus has fed China’s accumulation of a $3.66 trillion trove of foreign exchange reserves as of the end of the third quarter.

Some U.S. congressmen have urged the Obama administration to take China to task for holding down the value of its currency, boosting its exporters at the expense of foreign competitors.

Despite China’s stated government commitment to bolster domestic demand and liberalize the exchange rate, the country’s exports continue to outpace imports almost every month. With weak inbound shipments, the trade surplus in November was the largest since January 2009. “Imports were disappointing,” said Ma Xiaoping, an economist at HSBC. “Domestic demand is still tepid.”

The strong export numbers came as a surprise after South Korea, whose manufacturers serve similar markets as China’s, registered just 0.2% year-over-year export growth for November. The median forecast of 11 economists surveyed by The Wall Street Journal was for 7% export growth in China.

China’s exports, once the major engine of the economy, had suffered since the global financial crisis, with Europe and the U.S. no longer a reliable source of demand. But a gradual recovery in the developed world in recent months has brightened the outlook for the country’s export machine.

“There are signs that the global activity and trade cycle is gaining momentum, driven by the recovery in high income countries, and China’s exporters are benefiting from that,” said Louis Kuijs, an economist at RBS.

Chinese exports to Europe and the U.S. were up 18.4% and 17.7% respectively, compared with the same month a year earlier, though economists cautioned that a weak November in 2012 made for a flattering comparison.

The data may also be distorted by investment fund flows disguised as trade payments, as companies sidestep China’s system of capital controls. “The State Administration of Foreign Exchange issued strict regulations earlier in the year, but lately I hear that some new methods to evade the regulations are emerging,” said HSBC’s Ms. Ma. “So maybe that’s part of the reason for such high exports.”