China’s export rebound in November sparks hope, but challenges remain  

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In a relief for Chinese factories, the country’s exports grew by 0.5 per cent in November, marking the first positive growth in six months. According to Reuters, this unexpected uptick suggests that Chinese manufacturers are attracting buyers through discount pricing to overcome the prolonged slump in demand.  

Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, notes that the improvement in exports aligns with market expectations, indicating sequential growth in China’s exports in recent months. Zhang also highlights positive trends in other Asian countries’ export data, offering a glimmer of hope amidst global economic uncertainties. 

Challenges and discounted exports 

While the export growth is encouraging, challenges persist for Chinese manufacturers. The official purchasing managers’ index (PMI) reveals that new export orders have contracted for a ninth consecutive month.  

A private sector survey echoes these challenges, indicating the struggles of factory owners to attract overseas buyers for a fifth month. Zichun Huang, China economist at Capital Economics, notes that while export volumes have hit a fresh high, this robustness is supported by exporters reducing prices, a strategy that may not be sustainable in the long run.  

Analysts caution that the pressure on Chinese manufacturers shows little sign of easing off completely. 

Upbeat global trade indicators 

Despite the challenges, global trade indicators present a more optimistic picture. The Baltic Dry Index, a gauge of global trade, reached a three-year high in November, fuelled by increased demand for industrial commodities, particularly from China.  

South Korean exports, another indicator of global trade health, rose for a second consecutive month, buoyed by chip exports. Trade with China’s major peers, including the United States, Japan, South Korea, and Taiwan, also witnessed positive growth in November. These indicators point to a potential revival in global trade, providing some relief for China’s export-oriented economy.

Cautionary Notes and uneven recovery  

Despite the positive signals, analysts remain cautious about the sustainability of the export rebound and its impact on domestic demand. Dan Wang, Chief Economist at Hang Seng Bank China, emphasises that while overseas demand appears stronger than expected, domestic demand remains weaker.  

The uneven recovery raises concerns about property, unemployment, and weak household and business confidence, threatening a sustained rebound at home. Analysts stress that it is too early to determine the long-term impact of recent policy support measures and whether they will be sufficient to bolster both domestic and overseas demand. 

Global economic landscape and future challenges  

The International Monetary Fund (IMF) upgraded China’s growth forecasts for 2023 and 2024, reflecting some optimism. However, Moody’s recent warning of a downgrade to China’s A1 credit rating and the cautious response of Chinese markets suggest lingering uncertainties.  

The cooling economies of Europe and the United States pose challenges for China’s export-led growth strategy. While export demand has improved, concerns remain about the contribution of exports as a growth pillar into the next year. Analysts highlight the need for China to depend on domestic demand as the main driver for growth in 2024, given the evolving global economic landscape. 

(With inputs from Reuters) 

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