China's Export Numbers Disappoint as Iron Ore Imports Rise

China containers

A Reuters article this week points to China’s weak export numbers for November, a shocking plunge to 2.9% against an expectation of 9%, as evidence of the fragility of China’s economic prospects.

But an FT article of the same date paints an entirely different picture, and one that illustrates how one of the world’s greatest exporters has managed to encourage growth in its domestic markets, while much of the rest of the world stalls.

According to the FT Industrial, output in China increased 10.1% from a year earlier in November, up from 9.6% in October, while retail sales rose 14.9% year-on-year, up from 14.5%. Both came in slightly ahead of most forecasts and were the highest since March, fueled by looser monetary policy and the long-awaited government spending on infrastructure.

With many European economies contracting and the US posting only anemic growth, it’s hardly surprising that exports should be depressed, but as Clyde Russell at Reuters also noted, it is imports rather than exports that we should be focused on.

Iron ore imports showed strong performance, jumping 17% from October to 65.78 million tons, the highest since January 2011. While some of the rise was put down to mills restocking as prices rebound from third-quarter lows, the ongoing resilience in iron ore would seem to point to solid industrial demand.

The fragility, if there is any, may be in the source of demand — much of it is government investment rather than private sector, but real estate did pick up.

Sales of new homes increased 9.1% in the first 11 months of the year, rising 3.5 percentage points from a month earlier. That helped stimulate an increase in real estate investment, which climbed 16.7% in the first 11 months, accelerating from 15.4% in October.

Inflation remains under control, but did edge up with the consumer price measure rising to 2.1% from 1.7% in October. Not yet a source of concern, but with some costs like vegetables rising 11.3%, Beijing can’t afford to be complacent about widely consumed stables.

World Bank data shows exports generated 31% of gross domestic product in 2011, so poor export growth is certainly a drag on the economy, but for the next six months infrastructure investment is seen as likely to have more of a positive impact on China than exports holding it back.

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