Core view
Poor expectation: the rise in prices, order transfer and demand lead to short-term export toughness. Considering the Omicron impact and the potential possibility of wide-scale tightening of epidemic prevention policies in various countries, China’s export toughness may continue.
Exports are resilient in stages, and the follow-up trend remains to be observed
In November, China’s exports denominated in RMB increased by 16.6% year-on-year, compared with the previous value of 20.3%. In the interpretation of import and export data and forecast report in the early stage, we constantly remind that exports are resilient in the short term and benefit from three factors in the short term:
1) The support of prices for exports has gradually increased. In November, the export price index was 108.1, 10.5% year-on-year, 18.6 percentage points higher than that in May. From the perspective of categories, the price factor had a strong impact on exports in November, especially in the export categories such as integrated circuits, household appliances, steel, refined oil and so on.
2) There is still support for the one-time good brought by the disturbance of overseas supply by the epidemic. Epidemic prevention and control and vaccination are important measures to ensure the stability of the domestic supply system. The low vaccination rate makes it difficult for emerging market countries to cope with the impact of delta virus proliferation. The transfer of some orders to China brings one-time benefits to exports and forms support in the short term.
3) The demand for overseas orders in Europe and the United States leads to exports. As the shipping cycle is lengthened due to the poor global supply chain, the advance of Christmas and new year orders in Europe and the United States is good for China’s exports. It can be seen that the trade surplus between China, the United States and China Europe is at a high level from August to November.
Looking forward to the follow-up, we believe that the gradual repair of the global supply chain, the acceleration of vaccination in emerging market countries and the weakening of the impact of pre orders may lead to a gradual decline in exports. However, at present, Omicron virus itself and its potential secondary impact still need to be further observed. If Omicron virus leads to the re spread of the global epidemic and the tightening of epidemic prevention policies in various countries, under the above environment, China’s exports once again benefited from the supply advantage and continued to show resilience.
Domestic demand is the decisive force to eliminate disturbances and boost imports
In November, RMB denominated imports were 26% year-on-year, with the previous value of 14.5%. Domestic demand is still the core variable to explain imports. Keqiang index can better reflect the changes of domestic demand. The changes of domestic demand including industrial power consumption, railway freight volume and medium and long-term credit can be better tracked from the perspective of the prosperity of industry and service industry. The import data fell in October, mainly affected by the dual control of energy consumption and the epidemic situation, The former affects industry and the latter disturbs service industry.
The marginal recovery of import data in November benefited from the decline of the impact of early disturbance. The lower limit of coal supply and price stability has been alleviated, and the double control and correction of energy consumption has driven the repair of industrial production. In addition, the epidemic situation has changed from sporadic to centralized, the epidemic prevention measures have evolved to fine regulation, and the disturbance of epidemic prevention measures to the service industry has also been cooled.
In addition, price factors also support imports, Since April, the import price index has been above 110 for seven consecutive months (October import price index 117), significantly higher than the export price index, mainly due to the global rise in the price of bulk commodities, especially China’s dependence on the import of energy products and agricultural products. From the import structure data, the impact of price factors is more significant. In November, the import volume of iron ore, crude oil, soybeans and other commodities decreased, and the import volume and price of coal and natural gas increased simultaneously.
Risk tip: Sino US trade frictions worsened more than expected, the epidemic situation changed more than expected, impacted the global economy, and the global fiscal and monetary policies tightened more than expected
