BEIJING (Reuters) - China’s trade surplus was $17 billion in October, smaller than expected, as exports grew 15.9 percent from a year earlier while imports jumped 28.7 percent.
“The weakness in exports was very much in line with the global environment, especially the slowdown in Europe, and that’s going to continue through to the first quarter of next year.
“I think the underlying weakness is perhaps even weaker. The nominal growth is 16.5 percent, but my estimation is that the real growth could only be around 7-8 percent, adjusting for export prices.
“The strength of imports is stronger than expected. It shows the underlying industrial demand is fairly solid. Also, it’s likely that the inventory building still continues, partly because of the declining global prices. The producers take this opportunity to build their inventories.
“The trade surplus is likely to shrink. From the exchange rate prospective, the trade surplus has come down to a level that really doesn’t show a clear case for further sharp appreciation.”
“China imported more than the market expected last month, mainly boosted by the dropping commodity prices in the international market. It also shows that the domestic demand is still robust for now.
“The slowing export growth is largely due to the listless economy in the European countries and the U.S. We expect such a trend to continue in the coming months, which can also be seen from a smaller number of long-term export orders signed in the recent Canton Fair.
“The trade surplus remains at a relatively low level compared with the same period in the previous years, which could help reduce some appreciation pressure on the RMB”
“We were expecting quite a deceleration as external demand continues to decline in Western economies. But the key thing to look at here is the strength of the domestic demand factors as imports grew nearly 29 percent.”
“China’s real export growth has slowed to around 8-9 percent now from about 30 percent in the beginning of last year. Although monthly data could be volatile, the downward trend is confirmed.
“Falling property sales in the absence of any policy relaxation will force developers to slow their pace of expansion, and thus cut China’s demand for iron ore and other raw materials.”
“Import growth is a bit higher than we expected, showing that domestic demand is still resilient and may suggest that the economy would only slow down in a gradual way, but no risk of a sharp slowdown.
“Export growth continue to drop last month against the backdrop of a sputtering economy in European countries, which is the largest export destination of our country.
“With the Euro debt crisis spreading, we expect export growth to further decline in the months ahead and could fall to 13 percent in December from a year earlier.
“The full-year exports are likely to grow about 20 percent from the previous year. The trend is clear that trade surplus would continue to narrow in the last months of this year.”
SURESH RAMANATHAN, CURRENCY STRATEGIST AT CIMB, KUALA LUMPUR:
“The smaller surplus and slowing export growth reflect signs of a slowdown in the Chinese economy — all point to a soft landing for the economy, given yesterday’s CPI numbers that showed price pressures are easing.
“The argument for easing of monetary policy has just been stepped up.”
Reporting by Beijing economics team; Editing by Ken Wills and Jacqueline Wong