Tao Wang is the Head of Asian Economic Research and Chief Economist at UBS, and a member of the Board of Directors of the China Chief Economist Forum
Exports in November increased by 05%, compared to 6 percent year-on-year6%, the market expectation is flat year-on-year. Does this mean that the year-on-year trend in exports has ended?
The year-on-year growth rate of exports turned positive for the first time since April, with both a low base and month-on-month growth helping
Exports in November increased by 05%, compared to 6 percent year-on-year6%, the market expectation is flat year-on-year. The low base of the same period last year dragged down by the disruption of the epidemic, which was one of the factors driving up the year-on-year growth rate in November. In addition, exports also increased on a seasonally adjusted basis on a month-on-month basis. We estimate that real export growth in November will be up from 7.0% previously4% to 107%。
The growth rate of exports to major destinations has improved, and the export of IT products has reached a positive year-on-year growth
China's exports to the G3 (United States, European Union, Japan) narrowed year-on-year decline in November, with exports to the United States growing significantly**. Exports to emerging markets also improved, with exports to ASEAN economies narrowing year-on-year declines and exports to BRI economies (Brazil, Russia, and India) rising year-on-year. Mobile phone exports increased by more than 54% year-on-year, thanks to the low base, and the export volume also increased further. For the first time since mid-2022, exports of IT products have grown positively year-on-year, partly due to the low base effect, and the improvement in its sub-exports also corresponds to the bottoming out of the technology cycle**. The high base dragged down the year-on-year growth rate of automobile exports, and the year-on-year decline in consumer goods exports narrowed.
Imports turned negative year-on-year
Imports in November increased by 3 percent year-on-year from the previous year0% weakened to a small **06%, weaker than market expectations (3. year-on-year9%）。We estimate the year-on-year growth rate of real imports from 9.%.4% slowed to 26%。Imports were one of the main factors dragging down overall imports by a large year-on-year increase, while non-energy commodity imports were mixed. On the other hand, imports of IT parts achieved positive year-on-year growth for the first time in 19 months.
Foreign trade is expected to stabilize in 2024
Recent foreign trade-related data have been mixed. Export data from neighboring economies have shown signs of gradual improvement, but some survey data have weakened, and most PMI new orders indices are still in contraction territory. Based on the current data performance, we believe that the bottoming out of the technology cycle has supported the exports of on-chain economies, but the overall Chinese exports have not yet shown strong growth momentum. In the short term, we expect export growth to fluctuate around current levels and is unlikely to be substantial**. A potential recession and high base effect in the U.S. could put downward pressure on exports in the second quarter of next year. However, we expect exports to stop falling in 2024 and the export value to be the same as in 2023, and imports may also stop falling and increase slightly by 0.5%。
The weakening of the US dollar led to the appreciation of the RMB;The RMB exchange rate is expected to stabilize by the end of 2024
Against the backdrop of a weakening dollar index, the yuan appreciated against the dollar by more than 2 in November5% to the end of the month 7Around 13. Looking ahead, the fluctuations in interest rate differentials between China and the United States, US Treasury yields and the US dollar index may still bring about periodic fluctuations in the RMB exchange rate. Nonetheless, we still expect the PBOC to use various tools to prevent the USD/RMB exchange rate from trading at 7.%.The level of 3 has weakened significantly. We expect the RMB exchange rate to be 715 or so fluctuations. Foreign exchange reserves rose by US$70.6 billion to US$3 in November$17 trillion, mainly due to significant valuation gains.
The year-on-year growth rate of exports turned positive for the first time since April
In November, exports turned from negative to positive year-on-year, with a year-on-year increase of 05%, compared to 6 in October year-on-year6%, the market expectation is flat year-on-year. Imports weakened again to 0 y/y6%, compared to a 3. year-on-year increase in October0%, and the market expects a year-on-year increase of 39%。As a result, the November ** surplus widened from $56.5 billion to $68.4 billion.
We estimate a seasonally adjusted export growth of 2. m/m in November0%, compared to 4 in October9%。Affected by the disruption of the epidemic, the base of the same period last year was low. The combination of a month-on-month improvement and a low base drove the year-on-year growth rate of exports to turn positive for the first time since April.
We estimate that the year-on-year growth rate of real exports in November will increase from 74% up to 107%, which has been a positive year-on-year growth for four consecutive months. Real imports have been growing year-on-year for 10 consecutive months, but the year-on-year growth rate of real imports in November has increased from 9 in October4% slowed to 26%。We estimate that the year-on-year drag on imports and exports weakened further in November.
Exports to major destinations improved, and the year-on-year growth rate of exports of IT products turned positive
Exports to the G3 (US, EU, Japan) narrowed their year-on-year decline to 47% (10. year-on-year in October.)7%）。Exports to the U.S. increased by **10 year-on-year from October7%** to 7% year-over-year3%, partly due to a low base. The year-on-year decline in exports to Japan also narrowed, but the year-on-year decline in exports to the European Union widened. Exports to North Asian economies grew modestly by 06%。For emerging markets, exports to ASEAN economies were 7 year-on-year1% (previously **151%）。Exports to BRI economies (Brazil, Russia and India) grew at a year-on-year rate of 23% rose sharply to 179%。
Mobile phone exports in November increased by 54 percent year-on-year6%, a year-on-year increase of 218%。The year-on-year growth rate of mobile phone exports also increased from 101% acceleration to 242%。The acceleration of the year-on-year growth rate was mainly due to the extremely low base in the same period last year. On a month-on-month basis, the export value of mobile phones was ** month-on-month, but the export volume increased further month-on-month, and the unit price decreased. The strong volume of mobile phone exports indicates that the new mobile phone product cycle continues to provide a boost. In addition, the year-on-year growth rate of LCD panel exports remained stable, and the export of integrated circuits increased from 16 to 16 year-on-year6% improved to 12% year-on-year. The year-on-year decline in computer exports was the smallest since August 2022. Overall, exports of IT products in November increased by 5 year-on-year from the previous year4% improved to 13% year-on-year1%, the low base effect is one of the factors driving its year-on-year growth rate, and the significant improvement in exports of integrated circuits and computers reflects that the technology cycle has bottomed out**.
The year-on-year growth rate of exports of automobiles and auto parts increased from 249% slowed to 196%。After the seasonally adjusted, the export volume of automobiles further increased month-on-month, hitting a record high, indicating that China's auto industry maintains a competitive advantage in the global automotive chain.
Exports of consumer goods fell year-on-year from 13 percent previously3% narrowed to 67%。Among consumer goods, footwear exports fell the most (20%) year-on-year, while furniture exports rose to 36%。
Imports weakened again to a year-on-year increase**
In November, the overall import of major commodities weakened again to a year-on-year increase of **30%, compared to a 10% year-on-year increase. One of the main factors is the sharp decline in the growth rate of imports. **Imports weakened to 12 y-o-y8%, compared to a previous year-on-year increase of 84%, and the volume and price fell together. The high base effect is one of the factors for the sharp decline in the year-on-year growth rate of imports, however, imports have also weakened month-on-month. Among the energy commodities, the year-on-year growth rate of coal imports rose, although the base of the same period last year was higher, and the increase in its import volume offset the impact of imports.
Imports of non-energy commodities continued to grow steadily. The year-on-year growth rate of iron ore imports increased from 22 previously1% to 291%, as the upward growth rate of imports** offset the slowdown in the growth rate of import volumes. The year-on-year growth rate of copper ore imports in November increased from 34 percent previously9% slowed to 116%, still relatively stable, its year-on-year growth slowdown is mainly due to the slowdown in import growth.
The year-on-year decline in machine tool imports narrowed, and its imports maintained a year-on-year increase, and the year-on-year decline in imports narrowed. IT parts imports** increased by 6 year-on-year1%, the first positive year-on-year growth since April 2022, also reflects that the technology cycle has bottomed out**. Computer imports increased by 14 percent year-on-year in November4%, up 60% year-on-year in October, which may be related to the continued import of computers related to generative AI.
Foreign trade is expected to stabilize in 2024
Recent foreign trade-related data have been mixed. The export data of neighboring economies have shown signs of gradual improvement, among which South Korea, Taiwan, and Vietnam have maintained positive year-on-year growth in exports recently. Some survey data are also improving, such as the ISM manufacturing PMI in the United States, the PMI new orders index in developed markets, and the IFO industrial and ** index in Germany. On the other hand, some key indicators weakened, such as the emerging market manufacturing PMI new export orders index, and the new export orders index of other Asian economies such as Taiwan and South Korea. In November, the PMI new export index of the Bureau of Statistics and the new export orders index of the Caixin PMI both fell.
Based on the current data performance, we believe that the bottoming out of the technology cycle has supported the exports of the on-chain economy, but the overall Chinese mainland exports have not yet shown strong growth momentum. In the short term, we expect export growth to fluctuate around current levels and is unlikely to be substantial**. A potential recession and high base effect in the U.S. could put downward pressure on exports in the second quarter of next year. However, we expect exports to stop falling in 2024 and export values to remain the same as in 2023. Imports are likely to turn to a modest increase of 05% (2023**6.)5%）。
The weakening of the US dollar led to the appreciation of the RMB;The RMB exchange rate is stable at the end of 2024
In November, the renminbi appreciated against the US dollar by more than 25% to the end of the month 7Around 13. The sharp weakening of the US dollar was one of the main factors in the appreciation of the yuan, with the US dollar index falling by 3% in November. The renminbi depreciated by about 0 against the CFETS basket of currencies8%。
Looking ahead, the fluctuations in interest rate differentials between China and the United States, US Treasury yields and the US dollar index may still bring about periodic fluctuations in the RMB exchange rate. Nonetheless, we still expect the PBOC to use a variety of tools, including the reintroduction of a countercyclical factor at the central parity, to prevent the USD/RMB exchange rate from trading at 7.0%.The level of 3 has weakened significantly. In the medium term, we expect the RMB exchange rate to be at 715 or so fluctuations.
Foreign exchange reserves rose by US$70.6 billion to US$3 in November$17 trillion. **The widening of the surplus is one of the main factors. In addition, against the backdrop of the U.S. dollar index** and global financial assets in general**, the November valuation gains were substantial. Capital outflow pressures may ease in November as the renminbi appreciates against the US dollar.