By Ulf Bergman
That the Chinese export industry keeps doing well will hardly come as a surprise, especially as container spot rates have been soaring in the last few months. However, the latest release of data managed to surprise the pundits, with export volumes even stronger than the already high numbers expected. November’s numbers jumped by a healthy 21 percent compared with the same month last year, while economists were expecting a respectable twelve percent increase. Chinese exports keep growing despite its currency strengthening and reaching a 30-month high against the US dollar. The US was also the market that saw the greatest growth for Chinese exports, with an increase of sales by 45 percent.
Chinese imports, on the other hand, fell short of expectations last month. While still growing at a decent rate of four and a half percent, it fell somewhat below the rate of increase in October and some way below the consensus expectation in excess of five percent. Imports from the US, however, grew by a third, at par with the level recorded in October. Despite the growth in imports of energy and agricultural commodities from the US, levels are still well below those stipulated by the trade deal agreed earlier in the year. Given the size of the discrepancies, it is looking increasingly unlikely that China will be able to close the gap before the New Year.
Source: China General Administration of Customs
The strong growth in exports have pushed the Chinese trade surplus to a new record, with previous record set in May on the back of a dip in imports. The current export strength looks likely to carry into next year, but with vaccines being rolled out a general shift from spending on medical supplies to services could see the growth in exports softening to some extent. The Chinese foreign exchange reserves have also benefited from the growing trade surplus, with current holdings at levels not seen since the third quarter of 2016. The increase in foreign exchange reserves is likely to be a welcome development for the Chinese leadership, as they are looking to develop the economy towards less dependence on global supply chains and greater autonomy.
In contrast to the strong export figures presented by China, Australian authorities are sounding the alarm on its agricultural exports. The combined effects of worsening trade frictions with China and the lingering impacts of a previous drought are expected to push down the value of the export shipments by around seven percent in the 2020-21 period and hit a five-year low, although the numbers have been revised up from a projected decline of ten percent.
Despite a rising domestic demand and prices of wheat in China, Australian officials are warning that the commodity may get caught in the ongoing trade spat and face similar restriction as other grains. However, unlike other commodities, such as barley and coal, China is not a major buyer of Australian wheat. Australia is expecting to more than double its shipments of wheat to 21 million tonnes in 2020-21, but it may be unlikely that much of that increase end up in China. Meanwhile, Chinese wheat imports are likely to reach a 25-year high, but additional quantities are likely to come from more distant producers in the US and the Black Sea region, rather than Australia. Hence, Australian wheat exporters can also be expected to seek more distant buyers for their output.