China’s exports unexpectedly fell in September, signaling constraints from global demand and highlighting distortions from fake invoices that have yet to be eliminated from trade data.
Overseas shipments dropped 0.3 percent from a year earlier, the General Administration of Customs said yesterday in Beijing, trailing all 46 estimates in a Bloomberg News survey that had a median projection for a 5.5 percent gain. The trade slowdown resulted from a high basis of comparison with last year, the agency said in a statement.
The report may add to Premier Li Keqiang’s challenges in defending the government’s 7.5 percent expansion goal for this year. The International Monetary Fund cut its global growth outlook last week as capital outflows further weaken emerging markets and warned that a U.S. government default could “seriously damage” the world economy.
“It’s all quite murky,” said Shen Jianguang, Hong Kong-based chief Asia economist at Mizuho Securities Asia Ltd., citing the impact of inflated export data that started late last year, fewer working days due to the timing of the Mid-Autumn Festival holiday and currency volatility in Southeast Asia.
“There has been an export recovery since July to the U.S. and Europe but it’s been pretty weak,” Shen said. “The driving force for China’s recovery at this stage is still housing and infrastructure investment.”
Yuan Gains
Exports to the U.S. rose 4.2 percent in September from a year earlier, slowing from 6.1 percent in August, while sales to South Korea, Taiwan and the European Union dropped, customs data show. Growth in shipments to the Association of Southeast Asian Nations slid to 9.8 percent from 30.8 percent the previous month.
The benchmark Shanghai Composite Index (SHCOMP) of stocks advanced 2.5 percent last week, the biggest weekly gain in a month, and the yuan rose 0.02 percent against the U.S. dollar in Shanghai.
Estimates for September export growth ranged from 1 percent to 8.2 percent, after August’s 7.2 percent increase and a 9.8 percent gain a year earlier. On a seasonally adjusted basis, exports rose 5.3 percent from a year earlier and 8.3 percent from August, the agency said.
Comparing September’s exports with a year earlier may understate the true picture because of distortions from inflated data in 2012, analysts at Credit Agricole CIB and Citigroup Inc. said before the report. Regulators in May cracked down on over-invoicing of exports used to disguise capital inflows.
‘Artificially Depressed’
“Sometimes a single month’s data can’t tell the true story, and there are other factors as well,” Zheng Yuesheng, a customs spokesman, told reporters at a briefing yesterday when asked about the export drop. “I see this as a seasonal thing.”
Dariusz Kowalczyk, senior economist and strategist at Credit Agricole in Hong Kong, said before the report that the “trade numbers in the next couple of months, especially on the export side, will not be a good reflection of demand for Chinese products abroad or overall economic activity, because they will be artificially depressed from what happened a year earlier.”
Kowalczyk had the lowest estimate for September exports in the Bloomberg survey, projecting a 1 percent increase.
Imports (CNFRIMPY) rose 7.4 percent last month from a year earlier, customs data showed, topping the median 7 percent forecast in a Bloomberg survey. The $15.2 billion trade surplus compared with a median projection of $26.25 billion and $28.5 billion in August.
Healthy Picture
While imports used for processing and re-export “are still not doing very well, those that feed into China’s own economy continue to grow quite robustly, reflecting a still pretty healthy picture in terms of demand,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Plc in Hong Kong.
China’s daily oil imports climbed to a record last month. Purchases have risen “as a result of expansion in the economy and its growing demand for resources,” Zheng said.
In addition to the month’s fewer working days, the strong yuan has also “eroded China’s export competitiveness,” Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, said in a note yesterday.
The yuan rose about 2.7 percent against the U.S. dollar in the 12 months through September, while Asian currencies including the yen, Singapore and Taiwan dollars and Indonesia’s rupiah fell.
Port Throughput
There are still “downside risks to China’s economy,” Liu and economist Hao Zhou wrote. While there was speculation September’s trade slowdown resulted from last year’s over-invoicing, “our preliminary comparison showed that the port throughput indeed slowed in major wharfs last month,” they said.
The IMF said Oct. 8 that growth worldwide will be 2.9 percent this year and 3.6 percent next year, compared with July projections of 3.1 percent for 2013 and 3.8 percent for 2014.
While Zheng warned at the briefing of continued “downward pressure” on trade, he said a customs administration survey of about 2,000 exporters showed overseas shipments “will maintain stable development in the coming two or three months,” based on comments on orders and costs.
Premier Li said last week that gross domestic product grew more than 7.5 percent in the first nine months of 2013, putting China on track to achieve its full-year target of the same pace.
The statistics bureau will publish third-quarter GDP figures Oct. 18. The economy probably expanded 7.8 percent from a year earlier, according to a Bloomberg News survey, up from the second quarter’s 7.5 percent pace.
“The government still wants to maintain growth momentum and based on current data it can reach its goal, but with a very small safety margin,” said Oliver Rui, a professor of finance and accounting at the China Europe International Business School in Shanghai.(bloomberg.com)
