And just like that, China’s right back on track!
A trade balance report released on Saturday revealed that the economic giant posted a trade surplus of 27.7 billion USD, which was much larger than the projected 20.4 billion USD. Furthermore, this was an expansion from the previous month’s figure of 26.7 billion USD, marking the widest surplus since last June.
The cause of this was an impressive surge in exports of 9.9%, which was nearly double the projected 5.5% growth. Meanwhile, imports rose by 2.4%, as data indicated that Chinese manufacturers ramped up their copper and iron ore orders.
The surprise improvement in the trade balance has some economic hotshots believing that the slowdown in China may be coming to an end. They believe that the concerns about the outlook for the Chinese economy may have been overblown and that the world’s second largest economy could post even more impressive figures in the fourth quarter.
Furthermore, the rise in export growth could provide ample support to help boost employment, which in turn could lessen the pressure on the People’s Bank of China to keep pumping up the economy via accommodative monetary policy.
But as upbeat as these results seem, it’s hard to say if this kind of growth is sustainable since timing and seasonality played a big role in boosting the numbers.
For one, September’s exports could’ve been inflated as companies rushed to get their shipments in before the 8-day holiday that began at the end of the month. In addition to that, word on the street is that stronger pre-Christmas orders also played a role in lifting last month’s numbers. That being the case, it’s best not to get carried away by these numbers.
Let’s face it, my fellow economic nerds – the fact of the matter is that China still faces significant risks to growth.
Even the IMF acknowledges the headwinds that China may encounter in the coming months. Last week, it trimmed its 2012 growth forecast for China from 8.0% to 7.8%, its lowest since 1999. Meanwhile 2013 forecasts have been revised down from 8.5% to 8.2%
China’s exports industry in particular will be put to the test because of threats to growth from all over the globe. Just think about it – the U.S.‘s fiscal cliff, the euro zone’s never-ending debt problems, and China’s dispute with Japan pose serious limitations to China’s exports growth.
Remember, these are three of the largest economies in the world. If their demand for Chinese goods declines, it’ll be impossible for China to find replacements large enough to fill the void.
Overall, we can’t deny that reports like these suggest that China’s momentum is beginning to pick up steam. But the truth is, we’ll need to see a few more months of consistent results to be able to confirm an established trend.
If China can manage to string together a couple more months’ worth of upbeat reports, it could signal a major economic shift and help improve the global economic outlook. It could prove particularly helpful to the comdoll countries, who rely heavily on demand from China’s need for raw materials to boost their own exports industries.