Energy Demand Boost Imports

China’s exports growth softened to 22% yoy in Nov 21, but still grew at a faster-than-expected rate ahead of the year-end holiday, while imports growth surprised on the upside, surging to 31.7% yoy as domestic production rebounded on the easing power crunch. Despite resilience in overseas shipments alongside accelerations in imports growth, the strength in the latest trade figures is unlikely to buttress the persistent domestic headwinds alongside the latest Omicron outbreak.

WHAT’S NEW

Exports growth moderated but still beat estimates (Bloomberg consensus: 20.3% yoy). China’s exports grew by 22% yoy to US$325.5b in Nov 21, down from the 27.1% yoy growth in the previous month, pressured by a stronger renminbi, higher base and continuous supply snags. Despite weakening from last month’s growth, global demand remained resilient especially for Europe, while trade surplus with the US eased further to US$54.7b. We note however, that the sustained export growth rate was partially driven by higher prices due to the persistent supply-demand imbalance.

Imports accelerate on restocking. At 31.7% yoy growth, November’s import figures came in well above consensus forecast (Bloomberg consensus: 21.5%). Energy imports in particular boosted November’s figures with coal & ignite and natural gas surging 30.1% mom and 10.6% mom respectively, the highest levels in 2021, as Beijing scrambles to ensure sufficient supplies for the winter months. Meanwhile, imports excluding energy only grew 0.69% mom but declined 14.5% yoy. But on a more positive note, metals imports also defied the impact of a slowing economy and the country’s on-going property crackdown with iron ore purchases maintaining at relatively stable levels, while copper ores surged to a three-month high. There were similar trends for key products, with agricultural products seeing the greatest yoy growth at 24.3%, while mechanical & electrical products grew 17.0% yoy and hi-tech products grew 14.2% yoy.

Policy holds the key to 2022. We expect shipments to remain strong heading into the end of the year, but yoy growth should moderate in 1H22 as the base comparison becomes less favourable alongside the normalisation of global demands. However, the impact of the latest Omicron variant may pose a complicated impact on China’s foreign trade. On one hand, a derailed reopening could pose upside risk to exports if households rotate spending to goods. On the other hand, downside risks could materialise if supply-chain disruptions continue to worsen. While the latest uptick in imports suggests a gradual rebound in domestic activity, it may be insufficient to counter the ongoing domestic headwinds caused by the property sector. With more clues on policy action to come during the Central Economic Work Conference, we expect the government to continue ramping up supportive measures as other growth pillars including industrial production and consumption may have slowed further.