China’s Exports Unexpectedly Falter as Prices Keep Falling

Business|China’s Exports Unexpectedly Falter as Prices Keep Falling

After months of surging demand, China’s exports unexpectedly dipped in October, the first drop in eight months, partly from an ongoing slide in prices for many of China’s most popular exports like cars, solar panels and batteries.

The value of Chinese exports slipped 1.1 percent in October from a year earlier, China’s General Administration of Customs said on Friday. Western economists had expected China to announce another month of growth.

China’s exports have continued to boom this year, despite its trade war with the United States and rising tariffs in developing countries like Brazil, India, and Turkey, which also fear the effect on their factories’ employment from a deluge of low-cost goods made in China. Until October, shipments of Chinese goods to other regions of the world had more than offset the downturn in trade to the United States.

China is still on pace for a second straight year of record trade surpluses.

The physical volume of China’s exports has grown rapidly this year, lifted by a flood of Chinese cars, electronics, household appliances and other goods pouring into world markets. But the overall value of its exports is not keeping pace, as Chinese companies are offering significant discounts to overseas buyers to offload excess factory capacity.

China’s exports to the European Union, Latin America, Africa and Southeast Asia all weakened in October. The composition of China’s exports has been shifting toward products like cars and solar panels, which have experienced some of the largest price drops, and away from lower-technology products like furniture and apparel.

The number of exported cars rose nearly 25 percent in October from a year earlier, even as the value of those cars rose only 17 percent.

President Trump’s tariffs, by contrast, appear to have had a dwindling effect last month. Exports to the American market fell less in October than they had in either of the two previous months. There were also signs that Chinese companies are bypassing his tariffs by sending goods through other countries instead of directly to the United States.

“A rise in the share of Chinese exports going to Vietnam, the top rerouting hub, suggests that the tariff offset from rerouting continued to expand,” wrote Zichun Huang, China economist at Capital Economics, a consulting firm, in a research note. “So if anything, the drag from U.S. tariffs was moderating rather than increasing.”

China continued to export more than three times as much to the United States in October as it imported. That large trade surplus has helped Beijing maintain factory employment and strengthen the economy even as a long-running, slow-motion collapse of China’s housing market has badly hurt the finances of many Chinese households.

Consumers in China have been cautious about spending after losing a significant portion of their life savings in that downturn. With less demand at home, more of those goods are being redirected to overseas markets.

A slight strengthening of China’s currency, the renminbi, against the dollar in recent months may also have hurt the country’s competitiveness by making Chinese goods more expensive when sold in some overseas markets. But the renminbi has weakened by about 7 percent against the euro in the past year, which has helped Chinese exporters to the European Union.

Goldman Sachs pointed out in a research note that China’s exports also might have faltered because October had one fewer workday this year than last year.