China's trade data for October has delivered a mixed picture, with imports unexpectedly increasing while exports contracted at a faster pace than anticipated. These figures underscore the challenges faced by the world's second-largest economy, despite recent signs of improvement in domestic demand. While Beijing's support measures have contributed to a tentative economic recovery, ongoing issues like the property crisis and soft global demand continue to pose challenges for policymakers heading into 2024.
In October, China's exports declined by 6.4% compared to the previous year, which was a steeper drop than the 6.2% decline in September and worse than the 3.3% fall predicted in a Reuters poll. On the other hand, imports rose by 3.0%, defying expectations of a 4.8% contraction and marking a significant turnaround from the 6.2% decline recorded in September. This import growth effectively ended an 11-month streak of decline.
The surprising uptick in imports suggests a strengthening of domestic demand, particularly in terms of replenishing stocks. This may reflect a need to address supply chain disruptions and support various sectors of the economy.
However, the disappointing export figures are raising concerns about the sustainability of the global supply chain recovery, as many had anticipated improvements in this area. The weak export data may indicate subdued demand for certain categories of goods, such as Christmas products and clothing, rather than being solely attributed to supply chain issues.
Notably, China's official purchasing managers' index revealed that new export and import orders had been contracting for eight consecutive months in October, signifying the challenges faced by manufacturers in finding overseas buyers and ordering components.
While imports, particularly of crude oil and soybeans, have seen growth, trade with China's major trading partners, including Southeast Asia, showed a decline. However, trade with Australia has been an exception, with both exports to and imports from Australia increasing. This improvement in trade relations follows recent efforts to reduce trade barriers between the two countries.
Despite the positive impact on imports, China's overall trade surplus in October narrowed to $56.53 billion from $77.71 billion in September, falling short of the forecast of $82.00 billion.
Economists remain cautious about the sustainability of the recovery, given challenges like the property market, unemployment concerns, and weak household and business confidence. While policy support has been implemented, China's manufacturing activity unexpectedly contracted in October, adding complexity to the efforts to stimulate growth.
The outlook for global demand also remains uncertain, as advanced economies grapple with various economic challenges. All of these factors contribute to a cautious and fragile recovery in global trade, with implications for the broader international economy.
