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China Exports Exceed Estimates, Easing Concern on Slump Risk

Published: October 13, 2012 | 8:12 am
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China’s exports grew at the fastest pace in three months in September, easing concerns that the global economy is heading for the first recession since 2009.
Overseas shipments increased 9.9 percent from a year earlier, the customs administration said today in Beijing. That was more than the 5.5 percent median estimate in a Bloomberg News survey of economists and a 2.7 percent gain in August. Imports rose 2.4 percent, leaving a $27.67 billion trade surplus, the biggest since June.
The International Monetary Fund warned this week of an alarmingly high risk of a deeper global slowdown unless officials in the U.S. and Europe address threats to their economies. China’s widening trade surplus may provide ammunition to U.S. Republican presidential candidate Mitt Romney, who pledges to designate the nation a currency manipulator if elected, a step the U.S. government hasn’t taken since 1994.
“Recession in the euro zone, the possible fiscal cliff in the U.S. and the dispute with Japan will likely cap the upside” to China’s export growth in the months ahead, said Ding Shuang, a Hong Kong-based economist with Citigroup Inc., referring to looming U.S. spending cuts and tax increases that could limit that nation’s demand for exports.
The IMF’s steering committee today added to cautions on the global outlook, saying in a statement in Tokyo that policy makers “need to act decisively to break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth.”

Inflation, GDP

Today’s trade report was after data yesterday that showed slower-than-forecast loan growth in September and ahead of inflation and gross domestic product numbers next week.
The central bank said today that M2, the broadest measure of money supply, rose 14.8 percent in September, the fastest pace since June 2011. The nation’s foreign-exchange reserves, the world’s largest, rose to $3.29 trillion at the end of September from $3.24 trillion at the end of June, it said.
Premier Wen Jiabao is struggling to reverse a slowdown without swelling bad loans or fueling inflation as the Communist Party prepares for a once-a-decade leadership transition starting next month. The People’s Bank of China has refrained from cutting interest rates since July, in contrast with its counterparts in South Korea, Brazil and Australia.

Slowing Demand

The IMF this week reduced its estimate for China’s growth this year to 7.8 percent, which would be the weakest pace since 1999, from 8 percent. Alcoa Inc. (AA), the largest U.S. aluminum producer, meanwhile, reduced its forecast for global consumption of the metal on slowing Chinese demand.
Banks extended 623.2 billion yuan ($99.5 billion) of local- currency loans, the People’s Bank of China said on its website yesterday. That compared with the median estimate of 700 billion yuan in a Bloomberg News survey of economists.
“We could see China’s export growth maintained at 8 to 9 percent in the fourth quarter,” said Liu Li-Gang, a Hong Kong- based economist with Australia & New Zealand Banking Group Ltd. (ANZ), citing improved U.S. consumer sentiment and favorable year- earlier bases for comparison. “But growth of more than 10 percent is unlikely as a recession in Europe won’t change China’s export outlook there.”
Anti-China rhetoric may become stronger in the lead-up to the U.S. presidential election on Nov. 6, said Liu, adding that the yuan, which rose to a 19-year high against the dollar yesterday, may appreciate until then in response to the pressure. The yuan closed yesterday at 6.2672 per dollar.

‘Some Progress’

U.S. Treasury Secretary Timothy F. Geithner said in Tokyo today that while “some progress” has been made toward a more balanced economic relationship with China, more is needed. Today’s data indicated that the value of China’s exports to the U.S. exceeded its imports from the nation by about $21 billion.
The U.S. is delaying a report on the exchange-rate policies of its trading partners from Oct. 15 until after a meeting of the Group of 20 finance ministers and central bank governors next month, the Treasury Department said yesterday.
The Chinese economy probably expanded 7.4 percent in the third quarter from a year earlier, according to the median forecast in a Bloomberg News survey. If confirmed on Oct. 18, that would be the least since 2009 and the seventh quarterly deceleration.
“Global demand will likely remain weak in coming quarters,” said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong. “As a result, domestic demand, especially infrastructure investment, holds the key for China’s growth in the rest of the year.”

Record Shipments

Exports climbed to a record last month, with sales to the U.S. increasing at the fastest pace in three months. Shipments to Japan rose for the first time since June and those to Southeast Asian nations jumped 25.5 percent. The gains helped counter a 10.7 percent drop in exports to the European Union.
Copper imports climbed to a four-month high in September while purchases of iron ore were the biggest in volume terms since January 2011, customs data show.
The overall increase in imports in September compared with the median estimate in a Bloomberg survey for a 2.4 percent gain. Inbound shipments recorded the first non-holiday drop in August since 2009.
The trade surplus was higher than the $20.5 billion median forecast in a separate survey and compared with a $26.66 billion excess in August. The surplus for the first nine months rose 38 percent from a year earlier to $148.3 billion, customs data show.

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