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China's Export Growth is above Market Expectation


Due to improved data in the European Union and the United States, China's exports outperformed market expectations in November this year. According to the General Administration of Customs, in November, exports went up by 12.7 percent year on year and imports increased 5.3 percent year on year.

The chief Greater China economist at ANZ Banking Group, Liu Ligang said that November’s export growth is above the market expectation of 7.0 percent, thanks to the improved data in the European Union and the United States. In November foreign trade stood at 370.6 billion USD, including168.4 billion USD of imports and 202.2 billion USD of exports.

Liu mentioned that in November, the trade surplus hit 33.8 billion USD, the second month for China to report more than 30 billion USD of trade surplus. In eleven months, foreign trade gained 7.7 percent year on year to 3.8 trillion USD. In 2013, China targeted foreign trade growth of 8 percent year on year. The target is higher than last year's real growth but below the 10 percent target set for 2012.

The chief economist of China International Capital Corporation, Peng Wensheng said that the Christmas season contributed to the rebound in November's exports. Peng added that another reason for the year on year growth was the relatively low basis in November 2012.

An expert with the Bank of Communications, Chen Hufei warned the “inflated export growth” was an additional possible factor to boost exports. The “inflated export growth” mostly involves arbitrage trading. It means that the companies may misreport exports to obtain bypass tax rebates or bypass government fund controls to channel fund into the mainland. This is done to profit from gaps in interest rates and foreign exchange rates. Liu stated that inflated export growth existed in exports of the first half year.

However, Zhao Jinping from the State Council's Development and Research Center took “inflated export growth” as negligible, even though it might have existed. This kind of behavior has provoked authorities to tighten supervision on trade flow.

The foreign exchange regulator vowed to intensify supervision of commercial bank’s trade finance to prevent abnormal flows of cross-border foreign exchanges and curb fake financing. It will also step up supervision on companies with abnormal trade balances, mainly those with abnormal rises in long-term trade financing and having typical traits of arbitrage.

Zhao said that in spite of the positive data, Chinese manufacturers will still face difficulties as they are losing traditional competitive edges in prices because of higher costs and rising yuan. Chen said that the sharp trade surplus in November may further aggravate pressure for the yuan to appreciate.

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