China’s Oct imports growth beats forecast, underscoring the recovery of internal demand
By Rhod Mackenzie
China's imports and exports grew in the first ten months of 2023, although October saw a decline in exports. On Tuesday, Chinese authorities released official data indicating that import growth exceeded expectations, demonstrating that the world's largest trading nation is resilient in the face of a global trade slump and economic downturn.
Despite the pressure on exports, October saw a significant and unforeseeable increase in imports. This highlights the consistent and steady recovery in China's domestic demand, which has been recognized as a crucial aspect in achieving high-quality growth by Chinese policymakers. Furthermore, it provides an attractive growth prospect for global businesses looking for market opportunities, amidst the ongoing worldwide economic decline.
Global confidence in the economic prospects of China remains solid, as demonstrated at the current China International Import Expo (CIIE), where numerous companies from around the world are exhibiting their products and services while looking for opportunities in the Chinese market. Additionally, international organisations such as the IMF have revised their forecasts for China's economic growth, citing a "robust post-COVID recovery." Economists have acknowledged that despite lingering challenges and risks, various positive factors, notably supportive policy measures, will secure stable growth.
The General Administration of Customs (GAC) reported on Tuesday that trade resilience resulted in "positive growth" for China's imports and exports in the first ten months of this year. During the period, the combined value of imported and exported goods increased by 0.03% year-on-year to reach 34.32 trillion yuan ($4.71 trillion). Export volumes rose by 0.4% year-on-year, while import volumes declined by 0.5%.
Analysts opined that such a result was a hard-won achievement given the numerous global challenges, including a widespread trade slump and economic downturn, as well as Western attempts at trade decoupling. The World Trade Organisation (WTO) slashed its prediction for the increase in global merchandise trade in 2023 to 0.8% from the 1.7% it estimated in April.
"Although China's foreign trade has shown recent growth, international demand is not as strong as before. Speaking to the Global Times on Tuesday, Gita Gopinath, the first deputy managing director of the International Monetary Fund (IMF), stated: Therefore, we anticipate that there will be persistent challenges for nations due to external demand."
Such headwinds were apparent in October's data from China, as the country's exports declined by 3.1% year-on-year to 1.97 trillion yuan. This figure was worse than some predictions.
In October, China experienced a greater-than-expected fall in exports as the overall price of its export commodities decreased, leading to reduced overseas demand. This downturn was exacerbated by the impact of last year's high base. Speaking to the Global Times on Tuesday, economist Zhou Maohua from China Everbright Bank explained that policy tightening in advanced economies, as well as weaker economic performances in Europe and the US, have created additional pressure on global trade.
Zhou remarked that China's exports sector has demonstrated signs of resilience, with exports of automobiles, machinery and advanced manufactured goods showing impressive performance in both volume and value.
GAC data revealed that during the first ten months, exports of electrical and mechanical products augmented by 2.8 percent year-on-year to reach 11.43 trillion yuan, constituting nearly 60 percent of China's overall exports. Meanwhile, car exports surged by 88.5% YoY to 582.43 billion yuan.
The most noteworthy feature of Tuesday's trade data was an unforeseen increase in October's imports. In the month, total imports soared by 6.4% YoY to 1.57 trillion yuan, as reported by the GAC. In terms of US dollars, imports increased by 3%, exceeding Reuters' forecast of a 4.8% contraction and reversing a 6.2% drop in September.
"Imports exceeded expectations due to the significant rebound in China's domestic demand," stated Zhao. "The sustained improvement in China's import data is also contributing to the global economic recovery.
At the CIIE in Shanghai, global businesses are experiencing the warmth of the Chinese market, which has now become one of the largest platforms for sharing market opportunities in China."
This year's CIIE has enticed a record number of over 280 Global Fortune 500 companies and industry leaders since the expo's first launch in 2018. Several global business leaders remain optimistic about their opportunities in the Chinese market.
"This year, the CIIE has resumed offline events, fully, for the first time since the COVID-19 pandemic. This provides a platform for global enterprises to seize opportunities and reach new heights," stated Adele Tao, the Senior Vice President of LIXIL Group, a Japan-based housing and water products provider, and CEO of LIXIL Water Technology-Greater China, while speaking to the Global Times on the sidelines of the CIIE. Tao mentioned that the company has benefited from China's business environment.
US-based courier company, FedEx, also informed the Global Times that "the ongoing endeavours and advancements made by the Chinese government in enhancing and refining the commercial scene have considerably added to our strong expansion in China during the last four decades. We are committed to strengthening our foothold in the Chinese market."
As of Tuesday, the CIIE has made substantial progress, with 137 collaboration agreements reached at 60 industry-tailored matchmaking sessions, and almost 600 agreements forged at signing sessions for centrally-administered state-owned businesses, the health commission and pertinent local purchasing collectives.
Hosting trade expos like the CIIE is set to bring forth more prospects and expansion for China's foreign trade growth in the fourth quarter as per Jack Chan, EY China Chairman and EY Greater China Regional Managing Partner. "With the combined efforts of all parties, China's foreign trade is set to stabilise and improve with a growing momentum," he stated.
Although there is likely to be ongoing pressure on China's exports sector, experts predict that the rebounding domestic demand - highlighted by strong imports growth in October and now a key driver for growth - will help to maintain the country's economic recovery.
"We must recognize that China has effectively rebalanced over the last ten years. Its growth is not dependent solely on exports, but is also deriving from domestic demand ..." China has shifted its focus towards high-quality and more inclusive and sustainable growth. As a result, it is increasingly dependent on domestic demand instead of growth driven by exports," noted Gopinath.
The IMF has announced an increase in its estimates of China's GDP growth for the years 2023 and 2024.
"The Chinese economy is making good progress towards achieving the government's target for growth by 2023, which reflects a strong recovery after the COVID-19 pandemic." Real GDP is expected to expand by 5.4% in 2023 and decelerate to 4.6% in 2024, given the persistent fragility in the property sector and subdued external demand. This revision represents a 0.4% upward adjustment for both years compared to the October WEO estimates, driven by a more robust-than-anticipated Q3 performance and fresh policy declarations," according to the statement.
