Chinese exports in October beat expectations and offer a buffer to slowing domestic economy

Containers are seen at the Yangshan deep-water port in Shanghai, China October 19, 2020 Reuters

Meanwhile, its crude oil imports plunged in October to their lowest since September 2018, as major state refiners suspended purchases due to rising prices while independent refiners were constrained by limited oil quotas. import.

China’s export growth slowed in October but exceeded expectations, aided by surging global demand ahead of the winter break, declining electricity and improving supply chains that had been severely disrupted by the coronavirus pandemic.

However, imports fell short of analysts’ expectations, possibly indicating the overall weakness in domestic demand.

Outbound shipments jumped 27.1% in October from a year earlier, slower than the 28.1% gain in September. Analysts polled by Reuters predicted growth would slow to 24.5%.

Zhiwei Zhang, chief economist at Pinpoint Asset Management, said the strong exports would help ease the weakening domestic economy and give the government more leeway in economic policy.

“The government can afford to wait until the end of the year to ease monetary and fiscal policies, now that exports provide a buffer to smooth out the economic slowdown,” he said.

Recent data has pointed to a slowdown in manufacturing. Factory activity declined for a second month in October, an official survey showed, while industrial production growth fell to its lowest since March 2020 – the first wave of the pandemic.

Relaxation of constraints

However, as part of heavy government intervention, some supply constraints have started to ease in recent weeks, including an electricity shortage that was triggered by a coal shortage, stricter emission standards and strong industrial demand.

Premier Li Keqiang said on Tuesday that the government would take measures to support the industrial sector as the economy faces further downward pressure.

Imports jumped 20.6% in October from a year earlier, accelerating from a 17.6% gain in September but well below expectations of a 25% increase.

Goldman Sachs data showed that the value of crude oil imports increased 56.3% year-on-year, from 34.9% in September, and the value of coal imports increased 292% year-on-year, accelerating further from a 234% gain in September, as the global energy crisis and post-Covid economic recovery have pushed up commodity prices.

China posted a trade surplus of $ 84.54 billion last month, the highest on record. It was also higher than the poll’s forecast of $ 65.55 billion and September’s surplus of $ 66.76 billion.

The world’s second-largest economy grew 4.9% in the July-September quarter from a year earlier, the lowest value since the third quarter of last year.

China’s trade surplus with the United States was $ 40.75 billion in October, according to Reuters calculations based on customs data, up from $ 42 billion in September.

US Trade Representative Katherine Tai pledged last month to exclude some Chinese imports from tariffs while pressuring Beijing for its failure to deliver on promises made in a “phase 1” trade deal struck under. the Trump administration.

October crude oil imports at three-year low

Meanwhile, China’s crude oil imports plunged in October to their lowest since September 2018, as major state-owned refiners suspended purchases due to rising prices while independent refiners were limited by quotas. import restrictions.

An oil tanker is seen at the port of Qingdao, Shandong province, China April 21, 2019 Reuters

The world’s largest importer of crude oil imported 37.8 million tonnes last month, data from the General Customs Administration showed on Sunday, equivalent to 8.9 million barrels per day (bpd).

This is down from 9.99 million bpd in September and 10.02 million bpd in the same period last year.

Over the January-October period, crude arrivals totaled 425.06 million tonnes, or 10.21 million barrels per day, down 7.2% year on year, according to customs data.

Crude imports fell on a monthly basis for a second month and the drop occurred amid a 62% rise in crude oil prices this year as economies open globally to cause of pandemic Covid-19 restrictions, boosting fuel demand.

Beijing’s crackdown on the illicit trade in crude oil quotas and import quotas for independent oil refiners has also weighed on purchases.

Customs data on Sunday also showed that China’s exports of refined petroleum products for October fell 31.8% year-on-year to 3.95 million tonnes.

Imports of natural gas, including piped and liquefied natural gas (LNG), amounted to 9.38 million tonnes in October, up 24.6% from the previous year.

Oil imports could rise in November as refiners pledged to address the shortage of diesel and gasoline supplies that have pushed up fuel prices.

In addition, Beijing has issued 14.89 million tonnes of crude oil import quotas for independent refiners for the remaining period of 2021, and Chinese company Zhejiang Petrochemical Corp (ZPC), operator of China’s largest refinery , separately received a quota of 12 million tonnes.

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