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BEIJING: China's exports topped forecasts in November, driven by a surge in shipments to non-US markets as manufacturers deepen trade ties with the rest of the world in light of President Donald Trump's prohibitively high tariffs.
The world's second-largest economy has ramped up efforts to diversify its export markets since Trump won last November's presidential election, pursuing closer trade ties with Southeast Asia and the European Union, and leveraging Chinese firms' global footprint to establish new production hubs for low-tariff access.
China's exports grew 5.9 per cent year-on-year, customs data showed on Monday (Dec 8), reversing from a 1.1 per cent contraction a month prior, and beating a 3.8 per cent forecast in a Reuters poll.
Imports were up 1.9 per cent, compared to a 1.0 per cent uptick in October. Economists had expected a 3.0 per cent increase.
"The tariff cuts agreed under the US-China trade truce didn't help to lift shipments to the US last month, but overall export growth rebounded nonetheless," said Zichun Huang, China economist at Capital Economics. "We expect China's exports will remain resilient, with the country continuing to gain global market share next year."
"The role of trade rerouting in offsetting the drag from U.S. tariffs still appears to be increasing," she added.
The average US tariff on Chinese goods stands at 47.5 per cent, well above the 40 per cent threshold that economists say erodes Chinese exporters' profit margins.
Chinese shipments to the US dropped 29 per cent in November year-on-year, the data shows, even though the month began with news that the United States and China had agreed to scale back some of their tariffs and a raft of other measures after Trump and his Chinese counterpart Xi Jinping met in South Korea on Oct 30.
Exports to the European Union grew an annual 14.8 per cent last month, while shipments to Australia surged 35.8 per cent, and the fast-growing Southeast Asian economies took in 8.2 per cent more goods over the same period.
That boosted China's trade surplus to US$111.68 billion in November, the highest since June, from US$90.07 billion recorded the previous month, and above a forecast of US$100.2 billion.
The trade surplus for the 11 months of the year topped $1 trillion for the first time.
"Electronic machinery and semiconductors seem to be key," said Dan Wang, China director at Eurasia Group. "There is a shortage in lower-grade chips and other electronics, which meant prices jumped, and Chinese companies going global have been importing all kinds of machinery and other inputs from China."
KEY MEETINGS EYED AMID US-CHINA TRADE UNCERTAINTY
China's yuan firmed on Monday, off the back of the stronger-than-expected export data, with investors also awaiting policy signals from key year-end meetings.
The Politburo, a top decision-making body of the ruling Communist Party, pledged on Monday to take steps to expand domestic demand, a shift analysts say is crucial for weaning the US$19 trillion economy away from reliance on exports.
Top officials are also expected to convene for the annual Central Economic Work Conference in the coming days to set key targets and outline policy priorities for next year.
Economists estimate that diminished access to the US market since Trump returned to the White House has reduced China's export growth by roughly 2 percentage points, equivalent to around 0.3 per cent of GDP.
October's unexpected downturn, following an 8.3 per cent surge the month prior, signalled that Chinese exporters' tactic of front-loading US-bound shipments to beat Trump's tariffs had run its course.
Although Chinese factory owners reported an improvement in new export orders in November, they were still in contraction, underscoring continued uncertainty for manufacturers as they struggle to replace demand in the absence of US buyers.
An official survey tracking broader factory activity showed that the sector contracted for an eighth consecutive month.
DOMESTIC DEMAND STILL SOFT
China's rare earth exports jumped 26.5 per cent month-on-month in November, the first full month after Xi and Trump agreed to speed up shipment of the critical minerals from the world's largest refiner.
The nation's soybean imports are also poised for their best-ever year, as Chinese buyers, who had shunned US purchases for the majority of this year, stepped up purchases from American growers in addition to large purchases from Latin America.
Overall, China's domestic demand remains soft due to a prolonged property downturn.
That weakness was seen in a decline in imports of unwrought copper, a key material in construction and manufacturing.
"China's pivot to establishing domestic demand as a key driver of growth will take time, but it’s essential for China to move into the next phase in its economic development," said Lynn Song, ING's chief economist for Greater China.
