China reported a worse-than-expected decline in exports and a surprising increase in imports for October, according to the latest official data released on Monday. The trade figures reflect the impact of the global pandemic and the ongoing tensions with the U.S. on the world’s second-largest economy.
China’s customs agency said exports in U.S. dollar terms fell by 6.4% in October from a year ago. That’s worse than the 3.3% drop predicted by a Reuters poll. The decline was also larger than the 3.7% fall in September.
The drop in exports was mainly due to weak demand from major trading partners, especially the U.S. and Europe, which are still struggling with the resurgence of Covid-19 cases and lockdown measures. China’s exports to the U.S. fell by more than 8% year-on-year in October, while exports to the European Union dropped by double digits, according to CNBC’s calculations of official data.
Some analysts also attributed the decline to the appreciation of the Chinese yuan, which has gained more than 6% against the U.S. dollar since the end of June. A stronger currency makes Chinese goods more expensive and less competitive in overseas markets.
Imports rise by 3% year-on-year
In contrast to the weak exports, China’s imports rose by 3% in U.S. dollar terms in October from a year ago. That’s in contrast to the Reuters’ forecast for a 4.8% drop from a year ago. The increase was also higher than the 0.9% rise in September.
The rise in imports was driven by strong domestic demand, especially for commodities and consumer goods. China’s crude oil imports increased in volume and value, while imports of iron ore, copper, and soybeans also grew. Imports of cars, cosmetics, and clothing also rose, indicating a recovery in consumer spending.
China’s imports from the Association of Southeast Asian Nations (ASEAN) grew by 10.2% year-on-year in October, while imports from the European Union rose by more than 5%, according to CNBC’s calculations of official data. However, China’s imports from the U.S. fell by 3.7% year-on-year in October, reflecting the ongoing trade frictions and tariffs between the two countries.
Trade surplus narrows to $58.44 billion
As a result of the diverging trends in exports and imports, China’s trade surplus narrowed to $58.44 billion in October, down from $60.25 billion in September. The trade surplus was also lower than the Reuters’ estimate of $60.98 billion.
China’s trade surplus with the U.S., however, widened to $31.37 billion in October, up from $30.75 billion in September. The trade gap remains a contentious issue in the bilateral relations, as the U.S. has accused China of unfair trade practices and currency manipulation.
China and the U.S. signed a phase one trade deal in January, which required China to increase its purchases of U.S. goods and services by $200 billion over two years. However, according to the Peterson Institute for International Economics, China is far behind the target, having imported only 53.6% of the year-to-date amount as of September.
Outlook remains uncertain amid pandemic and geopolitical risks
China’s trade data for October showed that the country’s economic recovery is still uneven and vulnerable to external shocks. While domestic demand has rebounded from the pandemic-induced slump, global demand remains sluggish and uncertain.
The outlook for China’s trade also depends on the development of the pandemic and the geopolitical situation. The resurgence of Covid-19 cases in many countries poses a risk to China’s export-oriented sectors, as well as its efforts to contain the virus domestically. The outcome of the U.S. presidential election and its implications for the trade relations between the two countries are also uncertain.
Some analysts expect China’s trade to improve in the coming months, as the country continues to ramp up its production and consumption, and as the global economy gradually recovers from the pandemic. However, others warn that the challenges and uncertainties are still high, and that China needs to diversify its trade partners and markets, and to boost its innovation and competitiveness.
