A huge trade surplus amid all the doom and gloom suddenly surrounding China’s exporters seems counterintuitive. Yet, China has just racked up its third record trade surplus — and markets are spooked.
The newly released October trade figures show that exports, at $128.3 billion, were up 19.2% year on year. That was the third consecutive monthly deceleration in export growth, but it was better than expected, especially as the export-driven south of the country has seen a wave of factory closings and layoffs. ( See “Cold Christmas For China’s Manufacturers”) It was also impressive when you consider that China’s European export markets are in recession and those in the United States and Japan contracting.
But a trade balance has two components and imports, at $93.1 billion, were up a less-than-expected 15.6%. That faster deceleration than exports is the reason the trade surplus widened and points to an accelerating cooling of domestic demand, though falling commodity prices would also have contributed to the value of imports.
The figures were announced after Asian markets closed but European stocks fell on the news as investors questioned whether the slowdown in domestic demand implied by the trade figures meant China would not be an effective engine of global growth. (See “Europe Worries About China Trade Surplus.”) At midday in New York, U.S. stock indexes were showing losses of around 3.0%, and the iShares FTSE/Xinhua China 25 Index (nyse: FXI – news – people ), an exchange-traded fund that reflects large companies in China that are available to international investors, slid 5.6%, or $1.49, to $25.12.
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