China's Shipments Surge After Six-Month Slump, Bringing Relief to Factories

For the first time in six months, China's exports increased in November, indicating that manufacturers in the second-biggest economy in the world are drawing customers with low prices in an effort to recover from a protracted decline in demand.

Although requests for further policy support to promote growth have not waned, mixed manufacturing data for November has sparked concerns about whether improvements in circumstances have been hidden by polls that are primarily negative in attitude.

Customs statistics on Thursday indicated that exports increased by 0.5% in November compared to a 6.4% decline in October, above the 1.1% decline predicted by a Reuters poll. After rising 3.0% the previous month, imports dropped 0.6%, shattering predictions of a 3.3% gain.

Global Trade Indicators Point to Positive Trends

Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, remarked that the improvement in exports aligns with market expectations. He mentioned that sequential growth in China's exports over the past few months has strengthened, and there are also positive signs in other Asian countries' export data.

November saw a three-year high for the Baltic Dry Index, a leading indicator of global commerce, thanks to better demand, especially from China, for industrial goods.

November saw a second month of growth in South Korean exports, a key indicator of the state of international commerce, helped by semiconductor exports, which ended a 15-month downward trend.

The picture of trade with China's key trading partners was similarly positive, with exports to the US, Japan, South Korea, and Taiwan all rising in October.

However, there are no immediate signs that the pressure on Chinese manufacturing will lessen.

Mixed Signals in China's Economic Landscape

Last week, China's official purchasing managers' index (PMI) revealed a decline in new export orders for the ninth consecutive month, while a poll conducted by the private sector revealed that factory owners have been finding it difficult to draw in foreign customers for the fifth consecutive month.

In November, factory gate prices in the official PMI fell for a second consecutive month, but input costs increased for the fifth consecutive month.

However, other experts contend that recent real data presents a less dire image of the Asian giant's economic health than the sentiment-based polls, citing faster-than-expected growth in the third quarter and a run of largely positive statistics from October. They claim that the hard data also indicates that the assistance measures that Beijing has been leaking out since June have had some impact.

It's too soon to tell, according to analysts, if the recent policy assistance will be sufficient to boost domestic demand or how long-lasting any increase in demand abroad will be, since weak consumer and business confidence, real estate, and unemployment all pose threats to a long-term recovery in domestic demand.

Although it started from a weaker foundation, the International Monetary Fund increased its China growth projections for 2023 and 2024 by 0.4% percentage points each in November. Additionally, Moody's downgraded China's A1 credit rating on Tuesday and issued a warning.

With the yuan weakening versus the dollar following the report, the country's blue-chip CSI300 stock index dropped 0.44%, and Hong Kong's Hang Seng saw a 1.46% decline, the Chinese markets appeared to reflect this caution.

November saw a 9.2% year-over-year reduction in China's imports of crude oil, the first such drop since April as the country's large inventory levels and weak manufacturing activity affected consumer demand for goods like diesel. However, imports of iron ore increased somewhat last month.