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DEPT OF COMMERCE FOR IRA KASOFF, NICOLE MELCHER (5130, MAC (4420)
TREASURY FOR OASIA/DOHNER/WINSHIP
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E.O. 12958: N/A
TAGS: ETRD EIND CH
SUBJECT: China Export Growth Startles
1. (SBU) Summary: China's December trade numbers came in much
higher than forecast, with a 17.7 percent increase in December
year-on-year (yoy). Imports grew even faster, increasing 55.9
percent in December year-on-year. While the data beat all
forecasts, the large increases are in part due to the low base
comparison with the unusually weak trade numbers a year ago.
Analysts believe the rebound in China's trade, however, will
continue well into 2010. At the same time, China's media is
predicting that China's trade growth last month will put it ahead of
Germany as the world's top exporter for the first time. End
summary.
2. (SBU) December trade data released January 10 by China's Customs
Administration showed much higher than forecast increases in export
figures for the month and a slight drop in China's global trade
surplus to USD 18.4 billion from 19.1 billion in November. Export
growth rebounded to 17.7 percent yoy in December (solidly beating a
representative Goldman Sachs forecast of 6.0 percent, and rising an
impressive 23 percent over November levels). Key contributing
factors include recovery in external demand, the low base effect of
2008's global financial crisis, and the fall in the RMB's effective
exchange rate (thanks to the informal peg to a depreciating US
dollar). The gain in exports was broadly based across major
markets: up 10.2 percent over the previous month to the U.S.; up
10.7 percent to the EU; up 15.4 percent to ASEAN. Sectorally
speaking, exports of mechanical and electrical products (which made
up 59 percent of total exports) rose 13.4 percent in December mom/sa
(month-on-month/seasonally adjusted); high-tech exports were up 11.1
percent; low-end consumer goods were up a lower 7.7 percent mom/sa;
clothing rose 7.5 percent mom/sa; toys climbed a paltry 3.7 percent.
3. (SBU) Imports growth also rose sharply to 55.9 percent yoy in
December (a record high, up from 26.7 percent in November.)
Analysts attribute the strong growth in imports to: strong exports
(a large part of China's imports are inputs for future exports);
rising import prices; and continued strength in domestic demand for
commodities and mechanical equipment for infrastructure projects and
property construction. Sectoral breakdowns show imports of crude
oil rose a hefty 24.1 percent in December month-on-month (seasonally
adjusted) and mechanical and electrical products were up 6.7 percent
month-on-month. Interestingly, imports of several industrial metals
showed slowing gains or outright declines in December.
4. (SBU) Looking at 2009 as a whole, Customs data show Chinese
exports for the year totaled USD 1.2 trillion (down 16 percent yoy).
Imports for the year were down 11 percent. The trade surplus, as
calculated by the PRC, decreased by 34 percent to USD 196 billion.
The standing of key trading partners remained unchanged with
China-EU trade volume still at the top, U.S. total trade volumes
second, and Japan third. (Exports to the U.S. totaled USD 220.8
billion, a 12.5 percent decrease over 2008, and imports were USD
77.4 billion, a 4.8 percent drop from 2008.) Chinese media are
making much of the expectation that December's unexpectedly strong
export figures will push the PRC ahead of Germany as the world's
largest exporter.
5. (SBU) A broad array of analysts expect solid recovery in China's
exports to continue in early 2010, though not at December's torrid
pace. Even the unexpectedly good numbers did not stop Zhang
Yansheng, Director of Institute of Foreign Trade of the National
Development and Reform Commission, from telling China Daily that
export "quality" needs improvement, since a "big proportion of
(China's) exports are low value-added." Other Chinese experts have
sounded a similar off-note, noting that by measure of technological
innovation and industry competitiveness China's status as a trade
power remains limited.
HUNTSMAN