China’s October exports rise despite economic turbulence

BEIJING — China’s exports remained strong in October, a positive sign for an economy trying to weather power shortages and covid-19 outbreaks.

The country’s customs agency said Sunday that exports totaled $300.2 billion, up 27.1% from a year ago. October’s exports were from a 28.1% increase in September but still healthy. Imports came in at $215.7 billion, a 20.6% rise.

Exports and imports are much higher than a year ago, when much of the world was in the throes of the covid-19 pandemic, but there is widespread concern that economic headwinds are slowing growth. The world’s second-largest economy grew 4.9% in the three months ending in September, down from 7.9% in the previous quarter.

China’s trade surplus in October was $84.5 billion, up from $66.8 billion the previous month, the customs agency said. The surplus with the U.S. was down slightly to $40.7 billion, compared with $ 42 billion in September. With the EU, it was $25.9 billion.

China and the U.S. are mired in a trade war that dates from the administration of former President Donald Trump. The U. S. imposed tariffs on Chinese products, and China retaliated with tariffs on American ones. U.S. Trade Representative Katherine Tai said last month that she planned frank talks with her Chinese counterparts over their differences.

China’s economy has been buffeted by the government’s tough covid19- related restrictions, which have depressed domestic travel and consumer demand, and power shortages that have pushed down factory production. Regulators are also cracking down on debt-laden real estate developers, slowing the housing market.

Separately, record inflows into China’s bond market are giving it a stockpile of dollars unseen since the days when the “Asian savings glut” was blamed for keeping U. S. interest rates excessively low and fueling the sub-prime mortgage crisis.

But unlike then, when China aggressively recycled its dollar holdings into U.S. Treasuries, China’s giant pile of foreign exchange reserves is holding broadly stable. That means the dollars are being funneled somewhere else, but exactly where is proving to be a bit of a mystery.

While some of that flood of greenbacks is ending up as deposits at Chinese banks, the large “errors and omissions” in the nation’s balance of payments is muddying the picture. What is clear is that the dollars offer China an important cushion against any future shocks in the world economy, even as individual companies like China Evergrande struggle to repay their debts.

“It is exceedingly difficult to get a clear view of how China’s current account surplus is recycled,” said Alvin Tan, head of Asia foreign exchange strategy at RBC Capital Markets in Hong Kong. Nonetheless, the dollars mean that “whatever China’s economic challenges ahead, there is little danger of either a balance-of-payments or a foreign-debt problem.”

Foreign currency bank deposits are just shy of a record $1 trillion, according to Morgan Stanley estimates.

At the same time, its aggressive covid-zero policy has shuttered the nation’s borders and kept millions of Chinese tourists, and their savings, at home.

Some analysts argue that the booming current account has allowed China’s policy makers to rein in huge amounts of debt and begin a long-awaited campaign to deleverage its troubled real estate sector this year. But that leaves a question as to whether the U.S. demand for goods will keep up enough momentum to offset the effects of China’s slower credit growth.