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China commodity imports more important than sluggish exports: Clyde Russell

Dec 10 2012, 13:58 IST
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China's exports rose a disappointing 2.9% in November, imports were flat versus October's 2.4% rise.  (Reuters) China's exports rose a disappointing 2.9% in November, imports were flat versus October's 2.4% rise. (Reuters)
SummaryChina's exports rose a disappointing 2.9% in November, imports were flat versus October's 2.4% rise.

If anybody is worried by the seeming weakness of China's November trade data, then the commodity numbers should help reinforce the view that the recovery in the world's number two economy is on track.

Exports rose a disappointing 2.9 percent in November, well down on October's 11.6 percent gain, while imports were flat versus October's 2.4 percent rise.

For exports, there was probably a tailing off because Christmas orders were likely shipped in the prior two months, and the ongoing drag from recession in Europe and sluggish recovery in the United States also would have been a factor.

But exports are becoming relatively less important for the Chinese economy, with the policy emphasis on switching to domestic demand as the main driver of growth. This can be seen by the higher-than-forecast 10.1 percent gain in industrial output in November and the 14.6 percent rise in retail sales, which also beat expectations.

On imports, especially on the commodity front, it appears lower prices may well have impacted the value figure, as the volume numbers show healthy demand across major items, such as crude oil, copper and iron ore.

Oil imports were the second-highest on record in barrels per day (bpd) terms, coming in at about 5.69 million bpd, about 110,000 bpd more than in October and behind only February's 5.98 million bpd.

Oil demand has been rising as new refinery units come on stream, with two starting in October alone.

Another started in late November, meaning there's a strong likelihood that crude imports will remain robust in December.

The new units are also slowly starting to make their impact felt on the net imports of refined products, which slipped to 1.35 million in November from October's 1.37 million.

While there are restrictions on the export of some fuels, the ramping up of refinery capacity should at least mean fewer imports of products, thereby cutting the net import figure even if exports remain relatively stable.

The granting of licences to directly import crude to smaller refineries, known as teapots, should also eat into product imports as much of these are in the form of fuel oil, which the teapots use as a feedstock.

Similar to oil, iron ore imports showed strong performance, jumping 17 percent from October to 65.78 million tonnes, the highest since January 2011.

While some of the rise was put down to mills restocking as prices of the

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