China’s trade surplus crossed the $1-trillion-mark for the first 11 months of this year – a new record, as the country’s exporters expanded their markets beyond the US and showed surprise growth in November.
China’s trade surplus was $111.68 billion last month, the highest since June, from $90.07 billion recorded the previous month, and above a forecast of $100.2 billion, customs data showed.
That was on the back of a surprise jump in exports, which grew 5.9% year-on-year for the month, reversing from a 1.1% contraction a month prior.
Imports were up 1.9%, compared to a 1.0% uptick in October. Economists had expected a 3.8% increase in exports and a 3.0% increase in imports.
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The world’s second-largest economy has ramped up efforts to diversify its markets since US President Donald Trump won the presidential election last November. Its manufacturers have continued to deepen trade ties with the rest of the world, leveraging Chinese firms’ global footprint to establish new production hubs for low-tariff access.
That drove a surge in shipments to non-US markets in November.
Exports to the European Union grew an annual 14.8% last month, while shipments to Australia surged 35.8%, and the fast-growing Southeast Asian economies took in 8.2% more goods over the same period.
“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.”
US tariffs still high
Meanwhile, Chinese shipments to the US dropped 29% in November year-on-year, customs data showed. That was despite the month beginning with news that the US and China had agreed to scale back some of their tariffs.
Both countries have taken a raft of other measures since Trump’s meeting with his Chinese counterpart Xi Jinping in South Korea on October 30. But current tariffs on Chinese goods headed to the US still remain prohibitively high.
“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 US tariffs still appears to be increasing,” she added.
The average US tariff on Chinese goods stands at 47.5%, well above the 40% threshold that economists say erodes Chinese exporters’ profit margins.
Export growth still hit
The Chinese 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 that analysts say is crucial for weaning the $19 trillion economy away from reliance on exports.
Top officials are also expected to convene for the annual Central Economic Work Conference in 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% of GDP.
October’s unexpected downturn, following an 8.3% 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 slow
China’s rare earth exports jumped 26.5% 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.
- Reuters, with additional editing by Vishakha Saxena
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