Can The Holiday Shopping Season Help China Recover?

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The holiday shopping season is boosting China’s trade at a time when the country needs it most. But that doesn’t mean its economic woes are over just yet, reports CNN.

Surge in exports

Chinese exports surged 27% in October from a year earlier, according to customs statistics released by Chinese authorities on Sunday. That’s a shade softer than September’s 28% year-on-year growth, but better than analysts were expecting.

The strong export figures lifted China’s trade surplus to a record $84.5 billion in October.

Analysts suspect China’s exports were bolstered by strengthening global demand as the world continues to recover from the coronavirus pandemic, along with retailers stocking up for the holiday shopping season.

Consequences

The widening trade surplus has also helped China boost its foreign exchange reserves, already the largest in the world. 

The total amount the country keeps in reserve increased to more than $3.2 trillion in October, the first increase since July, according to data from China’s State Administration of Foreign Exchange on Sunday.

China’s economic growth

China’s economic growth has also been under threat in recent months because of shipping disruptions and a deepening property crisis. GDP last quarter grew at its slowest pace in a year, up 4.9% from a year earlier.

Sluggish domestic demand, meanwhile, has vexed the country for much of the year. The latest import figure for October, up 21% year-on-year, was stronger than a month earlier but still well below an estimate of 25% from a Reuters poll of analysts.

The Oxford Economics analysts also said they expect export momentum to “remain weak” in the short term as new export orders decline, but said that the global economic recovery “should continue to underpin China’s exports” in the new year.

COVID-19

“Logistical constraints appear to have hampered the import side of the equation, and with Covid-19 popping up more widely on the mainland, there are risks here, especially if it hits ports and factories in crucial areas,” wrote Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, in a Monday note.

Power Crunch

China’s power crunch may be getting better, but the real estate slowdown and an ongoing Covid-19 outbreak in the country look set to slow growth, according to economists at Oxford Economics. They warned in a recent note that import momentum could be “feeble.”

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Source: CNN

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