Third quarter sees foreign trade expanding

China's foreign trade expanded in the third quarter to a record high, making the cumulative year-to-date growth in exports and imports turn from negative to positive, according to customs data.

Headline export growth in dollar terms rose further to 9.9 percent year on year in September from 9.5 percent in August, marking the sixth consecutive month of export figures higher than the market forecast.

Imports, meanwhile, surged by 13.2 percent from a year earlier, reversing the 2.1 percent year-on-year decline in August, well above market expectations and narrowing the headline trade surplus to US$37 billion in September from US$58.9 billion in August.

China’s resilience in exports has been mainly driven by its status as the first economy in and the first out of the COVID-19 pandemic, which contributed to a surge in exports of PPE (personal protective equipment) and work/study-from-home products, while competitors were still mired in the pandemic, according to financial services company Nomura.

“China’s export growth could remain elevated for another couple of months due to recurrent waves of COVID-19 overseas,” said Lu Ting, Nomura’s chief China economist. “On the other hand, the September improvement in import growth of most major commodities in volume terms suggests stronger domestic demand and some restocking.”

Goldman Sachs also expects export strength to persist in the coming months and that imports may also continue to expand on the back of continued recovery in domestic activity.

In the first three quarters of 2020, overall foreign trade expanded by 0.7 percent year on year to total 23.12 trillion yuan (US$3.43 trillion), with exports adding up to 12.71 trillion yuan, an increase of 1.8 percent from a year earlier, while imports dipped by 0.6 percent to 10.41 trillion yuan, the General Administration of Customs said on Tuesday.

“In the face of the severe impact of the COVID-19 pandemic, China has intensified its macro policy response, made solid efforts to ensure stability on six fronts and security in six areas,” said Li Kuiwen, director of the custom’s statistics department. 

“We have made major achievements in the overall prevention and control of the pandemic and in economic and social development, and the effect of policies on stabilizing foreign trade continued to appear, with imports and exports significantly better than expected,” Li said.

After experiencing the shock in the first quarter, imports and exports recovered largely in the April-June period though still posting a slight year-on-year drop. 

In the third quarter, China's foreign trade imports and exports added up to 8.88 trillion yuan, surging 7.5 percent year on year, among which exports soared 10.2 percent to 5 trillion yuan and imports advanced 4.3 percent to 3.88 trillion yuan. All three figures were an all-time high for a quarter.

The Association of Southeast Asian Nations was China's largest trading partner in the first three quarters.

China's foreign trade with ASEAN topped 3.38 trillion yuan, an increase of 7.7 percent, to account for 14.6 percent of China's headline foreign trade figure in the first nine months.

Trade with the European Union added up to 3.23 trillion yuan, up 2.9 percent, making the EU China’s second-largest trading partner. China's trade with the United States rebounded from earlier declines, with the value rising 2 percent to 2.82 trillion yuan over the period.

Trade with countries along the Belt and Road, meanwhile, grew 1.5 percent to total 6.75 trillion yuan.

The customs highlighted rapid growth in foreign trade by private enterprises. In the first three quarters of the year, they contributed a total of 10.66 trillion yuan to China's exports and imports, up 10.2 percent year on year, accounting for 46.1 percent of the total foreign trade value which was 4 percentage points higher than in the same period last year.

Of this total, private enterprises posted overall exports of 7.02 trillion yuan, a sharp increase of 10 percent, accounting for 55.2 percent of the total value of China's exports, while imports increased by 10.5 percent to 3.64 trillion yuan, accounting for 35 percent of the headline imports.

During the same period, foreign-invested enterprises contributed imports and exports of 8.91 trillion yuan, accounting for 38.5 percent. State-owned enterprises' imports and exports topped 3.46 trillion yuan to account for 15 percent of the total.

The trade pattern structure has been continuously optimized, with the proportion of general trade in the country's overall foreign trade growing larger, Li said.

In the first nine months, China's general trade rose 2.1 percent to 8.55 trillion yuan, accounting for 60.2 percent in total imports and exports which was 0.8 percentage points higher than in the same period last year.

In terms of industries, exports of pandemic prevention materials, laptops and home appliances performed well, due to lifestyle changes brought about by the pandemic. 

“The launch of new consumer electronics products and demand for work-from-home gadgets have boosted imports and the product cycle,” said Betty Wang, senior China economist at Australia and New Zealand Banking Group.

Nomura’s Lu believes demand for laptops may remain solid for a couple of months, “as it is one of the crucial pieces of equipment needed for online learning, although its strength may weaken as back-to-school demand moderates.”

Also of note, exports of pharmaceuticals and medical herbs jumped 21.8 percent, while that of medical instruments and equipments rocketed 48.2 percent.