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Exports grow at fastest pace since July 2022

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Factories rush goods as Trump's election win raises tariff

threat

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Imports undershoot, underline weak domestic demand

By Joe Cash

BEIJING, Nov 7 (Reuters) - China's exports grew at the

fastest pace in over two years in October as factories rushed

inventory to major markets in anticipation of further tariffs

from the U.S. and the European Union, as the threat of a

two-front trade war loomed large.

Donald Trump's sweeping victory in the U.S. presidential

election has brought into sharp focus his campaign pledge to

impose tariffs on Chinese imports in excess of 60% and is likely

to spur a shift in stocks to warehouses in China's No.1 export

market.

Trump's tariff threat is rattling Chinese factory owners and

officials, with some $500 billion worth of shipments annually on

the line, while trade tensions with the EU, which last year took

$466 billion worth of Chinese goods, have intensified.

Export momentum has been one bright spot for a struggling

economy as household and business confidence has been dented by

a prolonged property market debt crisis .

Outbound shipments from the world's second-biggest economy

grew 12.7% year-on-year last month, customs data showed on

Thursday, blowing past a forecast 5.2% increase in a Reuters

poll of economists and a 2.4% rise in September.

Imports fell 2.3%, compared with expectations for a drop of

1.5%, turning negative for the first time in four months.

China's trade surplus grew to $95.27 billion last month, up

from $81.71 billion in September.

"We can anticipate a lot of front-loading going into the

fourth quarter, before the pressure kicks in come 2025," said Xu

Tianchen, senior economist at the Economist Intelligence Unit.

"I think it is mainly down to Trump. The threat is becoming

more real."

TRUMP EFFECT

China's exports to the U.S. increased an annual 8.1% last

month, while outbound shipments to Europe jumped 12.7% over the

same period.

"We expect shipments to stay strong in the coming months,"

Zichun Huang, China economist at Capital Economics, said in a

note. "Any potential drag from Trump tariffs may not materialise

until the second half of next year."

"Trump's return could create a short-term boost to Chinese

exports as U.S. importers increase their purchases to get ahead

of the tariffs," she added.

Among China's top exports to the U.S. last year were

smartphones, tablet computers and video games consoles, Chinese

customs data shows, setting up a potential repeat of Trumps's

first term in office when he targeted Chinese electronics

manufacturers.

There are signs demand for such products is dimming.

Trade data from South Korea and Taiwan pointed to cooling

global demand, while German manufacturers have also reported

they are struggling to find buyers overseas, leading analysts to

conclude Chinese producers are slashing prices to find buyers or

simply moving stocks out of China.

An official factory activity survey for October showed

Chinese factories were still struggling to find buyers overseas.

"If the PMI new export sub-index has been going down, and

the export figure goes up, I think it is safe to say it's more

of an inventory shift," said Dan Wang, a Chinese economist based

in Shanghai.

Exporters also had help from an easing in weather-related

disruptions in September, enabling them to send out delayed

orders.

China and Hong Kong stocks edged up on Thursday, supported

by investor optimism over potential further stimulus measures,

while the yuan recovered from a three-month low against the

dollar.

The weaker yuan likely contributed to the surge in exports,

analysts say, though it also made imports more expensive.

IMPORTS HIT BY WEAK DOMESTIC DEMAND

China's imports from the European Union and Southeast Asian

economies fell an annual 6.1% and 7.3% last month, respectively,

while purchases from Japan just eked into growth.

The world's biggest oil importer's crude purchases fell 9%,

marking a sixth consecutive monthly year-on-year decline.

"The further slowdown in import growth is mainly due to the

weak recovery of domestic effective demand and impact of low

import prices and rising bases," said Zhou Maohua, a

macroeconomic researcher at China Everbright Bank.

But China's soybean imports surged last month, as grain

merchants in the U.S. raced to ship a record-large harvest to

the Asian giant ahead of the now-concluded U.S. election.

Overall, as China's trade engine faces challenges,

economists have cautioned Beijing against becoming too reliant

on outbound shipments for growth and urged officials to

introduce more stimulus.

ANZ analysts expect policymakers to deliver a mix of

monetary and other steps to overcome any higher tariffs under

Trump.

"The authorities will also consider some policy measures to

offset the tariff impacts such as subsidies or access to

funding," said Raymond Yeung, ANZ's chief economist for greater

China.

"Commercial policy measures will also include local

consumption campaign and developing new export market among the

Belt and Road countries."