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China’s exports rose slightly in November, breaking a six-month run of consecutive declines and giving a boost to policymakers looking to revive a flagging recovery in the world’s second-largest economy.
Exports rose 0.5 per cent year on year in dollar terms, official data showed on Thursday, compared with a forecast 1.1 per cent decline in a Reuters poll of analysts. In October exports dropped 6.4 per cent compared with the same period a year earlier.
Imports, however, fell 0.6 per cent, compared with a forecast 3.3 per cent increase and a 3 per cent bump in October, raising concerns that domestic demand remains weak.
“I think the strength of exports is somewhat surprising,” said Julian Evans-Pritchard, head of China economics at Capital Economics. “China seems to be gaining export market share in an overall environment where overall global trade volumes are falling.”
In China’s equity markets, the uptick in exports was overshadowed by rating agency Moody’s decision to lower the country’s credit rating outlook to negative. Mainland- and Hong Kong-listed shares hit a near-five-year low as the negative outlook weakened investor confidence in China’s prospects for stronger economic growth.
China’s tepid international trade is one of the main sources of pressure for policymakers in Beijing, who are also grappling with a liquidity crisis in the property sector and low domestic consumption since it relaxed Covid-19 restrictions at the end of last year.
But economists say in volume terms, China’s exports have reached record highs this year as the country’s exporters slash prices.
“There’s this structural shift going on towards electric vehicles and China’s the dominant producer for that,” said Evans Pritchard. “So that’s boosted exports to some extent, but I think that also Chinese exporters have cut prices a lot more aggressively than exporters elsewhere in region, and that’s helped them to gain market share.”
But he cautioned that with profit margins already at decade lows, Chinese producers probably would not have much more room to reduce prices next year, which could lead to weaker export performance in 2024.
On Thursday, EU leaders including Ursula von der Leyen, president of the European Commission, met President Xi Jinping in an attempt to smooth out growing differences over China’s huge trade surplus with the bloc and European opposition to its tacit support for Russia in the war in Ukraine.
The stronger than expected export figures follow mixed signals from other data, including the official purchasing managers’ index, which pointed to a decline in manufacturing activity last month.
The lower than expected imports indicated weaker domestic demand, with the economy hit by a property slowdown, while the pick-up in exports pointed to improved global demand for Chinese goods, economists said.
Nomura’s chief China economist Ting Lu said in a research note that next year would be slightly better for China’s exports, which he forecast would fall 1.5 per cent year on year, compared with a 5 per cent decline this year.
“Exports of consumer electronics and mobile phones may benefit from a potential global tech upswing,” he said.
China’s low inflation and weaker currency could also help its exports maintain a competitive edge, while electric vehicles, lithium batteries and solar modules may also continue to grow.
China’s exports helped prop up its economy during the three pandemic years when it was shut to the world, but they have struggled in 2023 as high global inflation and rising interest rates damp demand for its goods.
China’s customs administration said the EU was its second-largest trading partner in the first 11 months of the year after the Association of Southeast Asian Nations trading bloc.
Exports measured in the local currency renminbi to the EU fell 5.8 per cent during the period against a year earlier, while exports to the US, the third-largest trading partner, declined 8.5 per cent.
Additional reporting by Andy Lin and William Langley in Hong Kong