20221108-招银国际-China_Economy__Foreign_trade_drops_as_demand_worsens_7页_723kb

China Economy Summary

Core Content

This document provides an analysis of China's foreign trade performance and its implications for the broader economy in 2022 and 2023. It outlines the trends in exports and imports, identifies key trading partners and product categories, and discusses the macroeconomic factors influencing these trends. Additionally, it highlights the challenges facing the Chinese economy, such as the property market slump, weakening domestic consumption, and the impact of the zero-Covid policy.

Main Points

Export Trends

• October 2022: Exports of goods dropped 0.3% YoY in October after rising 5.7% YoY in September. The export price index growth was expected to be above 10% YoY, suggesting a potential volume decline of over 10% YoY.
• Destinations:
  • Exports to the US declined 9.6% YoY in October, following a 1.5% YoY drop in September.
  • Exports to the EU and Japan rose 2.5% YoY and 5.6% YoY, respectively, compared to sharp growth of 13.2% YoY and 10.8% YoY in September.
  • Exports to ASEAN remained strong, growing 22.9% YoY in October, after 28.4% YoY in September.
• Product Categories:
  • Furniture, lamps & similar products and automatic data processing equipment saw YoY declines due to weakening overseas housing markets and home economies.
  • Garments & shoes maintained strong growth due to increased social activities in overseas markets.
  • Steel products and motor vehicles experienced high growth, driven by China's enhanced competitiveness in energy and supply chain security.

Import Trends

• October 2022: Imports dropped 0.7% YoY after rising 0.3% YoY in September. The import volume is estimated to have fallen by over 7% YoY.
• Reasons for Decline:
  • Domestic demand weakened, partly due to tighter zero-Covid policies.
  • Commodity inflation declined, with the import price index growth slowing from 15.6% in July to about 7% in October.
• Key Imports:
  • Airplane imports dropped 40.7% YoY.
  • Steel products and integrated circuits imports decreased by 23% YoY and 13.2% YoY, respectively.
  • Grain, beauty cosmetics, and machine tools imports also fell by over 10% YoY due to weak domestic consumption and capital expenditure.

2022 and 2023 Forecasts

• Exports: Expected to grow 8% in 2022 and drop 4% in 2023 due to overseas recession and disinflation.
• Imports: Projected to grow 2% in 2022 and decline 1.5% in 2023 as domestic demand resumes slowly and commodity prices fall further.

Key Information

• The weakness in foreign trade adds pressure to China's economy, which is already struggling with the property market slump and zero-Covid policy.
• Economic Challenges:
  • The country faces increasing pressure to adjust its epidemic control measures.
  • The zero-Covid policy has become increasingly difficult to maintain due to financial strain on local governments and public dissatisfaction.
  • There is a risk of large-scale epidemic spread during the Chinese New Year holiday.
• The global economic environment is a key factor, with high inflation and abrupt monetary tightening in advanced economies contributing to overseas recession risk.
• Commodity Prices are expected to decline further in 2023, which will affect both export volumes and import costs.

Additional Context

• Economic Indicators:
  • Consumer Confidence Index and 10Y Treasury Bond Rates are included in the analysis to provide context on domestic and global economic conditions.
  • M2 Supply Growth is also considered as a factor in assessing economic activity.
• Data Sources:
  • The analysis is based on data from Wind and CMBIGM, with visual representations of key trends provided through various figures and tables.

Analyst Certification and Disclaimer

• The research analyst certifies that the views expressed accurately reflect their personal opinions and that their compensation is not related to the specific views in the report.
• Risks are highlighted, noting that investment decisions should be made independently and with the help of a professional financial advisor.
• Disclaimers state that the report is not an offer to buy or sell any securities and that CMBIGM is not liable for any losses incurred from relying on the report.
• The report is intended for specific recipients in different regions, such as the UK, US, and Singapore, and is subject to regulatory constraints in these markets.

CMBIGM Ratings

• BUY: Potential return of over 15% over the next 12 months.

• HOLD: Potential return of +15% to -10% over the next 12 months.

• SELL: Potential loss of over 10% over the next 12 months.

• NOT RATED: The stock is not rated by CMBIGM.

• OUTPERFORM: The industry is expected to outperform the relevant market benchmark.

• MARKET-PERFORM: The industry is expected to perform in-line with the market benchmark.

• UNDERPERFORM: The industry is expected to underperform the market benchmark.

Conclusion

The document underscores the economic challenges facing China, particularly in the foreign trade sector, and provides a detailed forecast for 2023. It highlights the importance of global demand, domestic consumption, and epidemic control policies in shaping the economic outlook. The analyst certification and disclaimer sections emphasize the objectivity and risk associated with the report, ensuring that readers understand the limitations of the analysis.