China's export growth weaker than expected

Helen Qiao, Morgan Stanley: China "rebound has legs to run"

China's export growth came in below market expectations in November as global demand remained subdued.

Exports grew 2.9% and imports were flat compared to the previous year. Analysts were expecting exports to jump 9%.

The trade data creates some uncertainty about China's economic outlook.

It contrasts with data released at the weekend which signalled a rebound in the Chinese economy, as factory output and retail sales jumped to eight-month highs.

The weak figures on exports are a reminder - if one were needed - that China remains exposed to the problems in Europe, the United States and Japan. If they perform badly, China's exports will suffer.

But those other recent figures suggest the slowdown may be just about over.

The most recent industrial output data was rather stronger than expected. It showed a rise of 10.1% in November from a year earlier. Retail sales were also stronger, at 14.9%.

Two-speed economy?

So the latest batch of figures seem to be giving different messages. That may be partly because of the contrast between problems in export markets and a stronger domestic economy.

It is also to be expected that when an economy is at a turning point, different data will point in different directions - some will be upbeat some not.

Zhang Zhiwei of Nomura in Hong Kong, for example, says the disappointing trade news does not change his view that China is on track for a strong recovery in the final quarter of this year because he says growth "is mostly domestically driven".

But in London, Capital Economics takes more of a glass half empty view.

In a note, the consultancy says "trade data have added to our doubts about the sustainability of China's rebound".

Their concern is that the signs of improvement have been driven by "infrastructure spending and little else".

These divergent views do illustrate one of the biggest questions about the Chinese economy; how quickly can it shift its dependence from exports to Chinese consumers.

With the largest developed economies still relatively becalmed that really does matter for China and for all the raw materials and components suppliers who feed Chinese industry.

Slowdown

China's economic growth, seen by many as a key driver of the global recovery, slowed to a three-year low of 7.4% in the third quarter.

Weak export growth and little improvement in domestic demand were two of the main factors.

The People's Bank of China has cut interest rates in both June and July and lowered the amount of cash banks must keep in reserve in an effort to boost lending.

Now, a slew of data has shown glimpses of a recovery and prompted analysts to predict the worst is over.

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