China’s latest November 2013 trade data – Does it point to more signs of stability, or is this a major game changer?

China released its trade data on December 08, 2013 indicating that the for the month of November 2013, total trade balance came in at USD 33.80 billion, with exports rising 12.70 percent (Oct 2013 was 5.63 percent, Reuters estimate was 7.10 percent), and imports grew by approximately 5.30 percent (Oct 2013 was 7.57 percent, Reuters estimate was 7.20 percent). The figures are illustrated on a year-over-year (yoy) basis. Overall, there are some signs of continued positive overseas demand for China’s goods and services, but the question is whether the latest trade information is an affirmation of the Chinese government’s current policy of focusing more on just achieving for stable growth, or will they be pushing for more economic growth going forward, despite growing signs that China’s economy is now advancing towards a somewhat more matured stage of growth?

Separately, on December 09, 2013, China released its latest inflation data pointing towards a subdued increase in overall prices with the producer price index (PPI) coming in within the expectations of a decline of a negative 1.4 percent on a year-over-year basis, and the consumer price index (CPI) coming in 3.00 percent growth on a year-over-year basis, versus expectations of a 3.20 percent growth. The data could be an indicator of any monetary policy moves from the country’s central bank, People’s Bank of China (PBOC), but it is unlikely to be the sole focus as inflation has been largely kept muted throughout the year as a result of the availability and accessibility to goods and services. The recent concerns have largely been expressed over the sustained rise in property prices seen lately, despite the various rounds of property cooling measures, and the severe curbs on home loans approvals, which could become one of the PBOC’s main focuses in 2014. The Chinese government is not about to think of crafting policies in engineering a housing price ‘crash’, which would have been seen as irresponsible and reckless, but will hope to see a gradual easing off of home prices going forward.

China’s latest trade data is pointing towards overseas demand growth, especially those coming from the United States and the European Union (EU) with 17.70 percent and 18.4 percent increases year-over-year growth respectively. In addition, information provided by Bloomberg Online News is pointing towards continued robust trade growth for the past few quarters, and has been fairly consistent with some of the views expressed by many Chinese market observers that economic growth has indeed shown to be slowing down. Lately, Chinese imports, especially iron ore where the country has emerged itself as the biggest importer for the industrial metal for steel-making purposes, increased. This is a key indicator for manufacturing growth in the economy, and points to some resilience in the overall Chinese economy.

Overall, for the past one year or so, China’s economy has generally been performing well, with most of the purchasing managers indices (PMI) published by HSBC, and the Statistics Agency in China pointing to the robustness in manufacturing growth, and this has so far been quite consistent with the outlook of many economists, and China market strategists’ views that the country is not about to diverge from its path of focusing solely on growth going forward. The type of growth expectations coming out from China is not indicating any supernormal type of increase, but is generally in line with most expectations regarding the future trajectory of Chinese economy.

The Third Plenum meetings in November 2013 have charted out the leadership’s policy goals going into the future, including the 60-point plan which outlined some of the targeted policies to be gradually adopted throughout the next decade, including family planning, scrapping the foreign participation limits on domestic firms. There is also a relaxation of rules governing how much stake domestic manufacturer and/or service providers can mount on to the state-owned enterprises (SOEs), where most of the SOEs in China currently occupy the majority share of the domestic equity indices. The new entrants, including most of the start-up enterprises continue to face challenges in terms of competition with the so-called ‘big boys’, which the Third Plenum hopes to address their concerns with tact, and continuing efforts to coax the owners of the SOEs to adapt to the competition.

Given the backdrop, and as well as the policy goals coming out from the Third Plenum, it appears that most of the Chinese government policy makers have gradually turned towards a general focus on maintaining consistency and growth stability. There is not so much of an emphasis being focused on boosting China’s growth figures just for the sake of satisfying the higher echelons of the Chinese Politburo and the citizens. The current Chinese administration is hoping that the society will feel less pressurised given that the government has now taken a more soften tone in its economic and social planning policies. However, concerns will still remain as to whether the Chinese people will gradually lose their drive towards greater productivity, and be willing to rest of their laurels, watching how the overall economy performs. This is a question that might interest many economists as there has been a general rise in the number of middle-income households, and more affluent society. There are also questions as to whether the average young generation in China, be it Gen-Y (post 1978 generation) and/or Gen-Z (post 2000 generation) is able to withstand hard knocks just as their peers do during the various struggles to achieve what China is of today.

Although a slowdown in the overall Chinese economy is inevitable, and generally healthy, but the Chinese people across all ages cannot afford to be satisfied with just being status quo. The Chinese leaders are quite mindful over how the society’s complacency towards slowing economic growth will impact China’s future going forward.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc