China’s exports, imports expand at faster pace on strong demand
China’s exports and imports rose at a faster pace in November, helped by strong demand and coronavirus-related disruptions at factories in other countries, a survey showed on Friday.
Exports are estimated to have risen 12% from a year earlier, according to a median estimate of a Reuters poll of 24 economists, quickening from an 11.4% gain in October.
Booming sales of fridges, toasters and microwaves to households across the locked-down world have helped propel China’s mammoth manufacturing engine back to life, super-charging demand for key metals like steel, copper and aluminium, ater a sharp slump early in the year.
Imports likely rose 6.1% on-year, also accelerating from the previous month’s 4.7% pace, buoyed by improving domestic demand and higher commodity prices.
China’s trade surplus is expected to have narrowed a bit to $53.5 billion in November from $58.44 billion in October, according to the poll. The data will be released on Monday.
Improving external demand signalled by November US and European factory surveys, and continued strong shipments of face masks and other medical supplies underpinned exports last month, analysts with China Minsheng Bank said in a note.
“The substitution effect of China’s exports will continue to increase as supply capacity of emerging economies has not recovered yet.”
China’s official and private manufacturing surveys also showed new export orders expanded at a faster pace.
But some analysts cautioned that surging infections and fresh lockdowns in some of its key trading partners could dent demand for Chinese goods.
A sharp appreciation of the yuan currency in recent months could also cloud the outlook for exporters. Some firms reported that a strong yuan squeezed profits and reduced export orders in November, the statistics bureau said this week.
The yuan has booked six straight months of gains, its longest such winning streak since late 2014, and is trading at 2-1/2 year highs.
UBS forecast China’s GDP growth would rebound to 8.2% in 2021, led by exports and domestic consumption. They expect exports to grow by 11% to 12% as the global economy recovers from recession, helped by rapid vaccine development.
Meanwhile, China’s first bond with a variable interest rate tied to a key benchmark dubbed ‘DR’ was issued on Friday, marking the latest step by the central bank to improve the pricing mechanism for financial markets.
China is joining other major economies in reforming its benchmark rate framework, as the London Interbank Offered Rate (Libor), once the most widely used global benchmark, is being phased out.
The People’s Bank of China ( PBOC) said in August that it will make Depository-institutions Repo Rate, or DR, a key reference for monetary policy adjustment and market price-seting.
On Friday morning, the Export-import Bank of China, a policy bank, auctioned a 3-billionyuan ($458.94 million) bond with floating rates pegged to seven-day DR. Rate of the six-month bond was set at 2.6%, 44 basis points above the benchmark, traders said.
Analysts say such products would help improve China’s benchmark interest rate system, and facilitate monetary policy transmission.
Floating-rate bonds could also help investors and issuers avert risks from volatility in interest rates, but such instruments account for just 1% of China’s bond market, mostly using Shibor as benchmark, according to official data.
Shibor, or Shanghai Interbank Offered Rate, is calculated using banks’ price quotations. However, DR is based on daily repo trading averaging 1.8 trillion yuan, and is the most recognized “barometer” of China’s banking system liquidity, the PBOC said in August.
In addition to floating-rate bonds, PBOC is also encouraging financial institutions in China to use DR as a reference to price other products, such as interest rate swaps and negotiable certificate of deposits (NCDS).
Last week, China’s interbank market platform rolled out value calculation services for interest rate swaps based on DR, and also started charting yield curves for such derivatives.
China stocks inched up on Friday to post a third straight weekly gain, buoyed by robust data pointing to a recovery in the world’s second-largest economy, though the rally was capped by escalating Sino-us trade tensions.
The blue-chip CSI300 index rose 0.2% to close at 5,065.92, while the Shanghai Composite Index advanced 0.1% to 3,444.58.
For the week, CSI300 strengthened 1.7%, while SSEC climbed 1.1%, both logging their third weekly gains in a row on upbeat data.
Booming sales of fridges, toasters and microwaves to households across the locked-down world have helped to propel China’s factories