September export growth rate slowed down significantly year-on-year, lower than the market consensus expectation. How should we interpret this, and what can we expect in the future?

September export growth rate weakened more than expected year-on-year

The year-on-year growth rate of exports in September slowed down to 2.4%, compared to 8.7% in August and the market consensus expectation of 5.9%. Our estimates show that after seasonal adjustment and excluding the impact of holidays, the month-on-month decrease in exports was 1.8%. The 3-month moving average of the month-on-month growth momentum weakened to -1.5% (0.2% in August). The General Administration of Customs stated that two typhoons landed in the Yangtze River Delta region in September, which may have caused some disturbance to export activities, and the recent global shipping difficulties may also have dragged down exports. Our estimates show that the actual export volume growth rate slowed down from 15.7% in August to 13.0% in September.

The year-on-year growth rate of exports to major destinations generally slowed down

The year-on-year growth rate of exports to the G3 slowed down from 7.6% in August to 1.2%. Exports to the United States maintained year-on-year growth, but the growth rate slowed down to 2.8%, and the year-on-year growth rate of exports to the European Union also slowed down. Affected by the high base, exports to Japan weakened to a year-on-year decline. Exports to ASEAN slowed down for four consecutive months to a year-on-year growth rate of 7.3%. The year-on-year growth rate of exports to "Belt and Road" economies, Latin America, and Africa all slowed down to the low single-digit range.

Advertisement

Mobile phone exports weakened to a year-on-year decline, even with the new product delivery cycle

Both mobile phone exports and export volumes increased significantly month-on-month, partly supported by the new electronic product delivery cycle. However, given that last September was also a peak export month, mobile phone exports weakened to a year-on-year decline. The export growth rates of computers and integrated circuits also slowed down. The overall IT product export growth rate slowed down to 1.1% year-on-year. On the other hand, despite the low base last year, the year-on-year decline in consumer goods exports still expanded. The year-on-year growth rate of automobile and parts exports slowed down, but still maintained double-digit growth (13.4%). The currently announced export data does not show signs of "rush exports" before the US election.

The import growth rate slowed down, indicating some weakening signs of domestic demand

The year-on-year growth rate of imports slowed down to 0.3%, compared to 0.5% in August and the market consensus expectation of 0.6%. Our estimates indicate that the actual import volume may have improved from the previous year-on-year decline of 1.3% to a year-on-year increase of 1.2%, mainly due to the expansion of the year-on-year decline in import prices. A basket of bulk commodity imports turned from a year-on-year increase of 0.1% to a year-on-year decline of 0.1%. Affected by the expansion of the year-on-year decline in import prices, the year-on-year decline in crude oil imports expanded to 11.1%. The year-on-year decline in iron ore imports expanded, but the year-on-year growth rate of copper ore imports rose. Our estimates indicate that the import volume of iron ore and copper ore further slowed down, reflecting weakening demand. The year-on-year growth rate of IT component imports slowed down from 10.6% to 9.5%. Due to the technology industry entering an upward cycle in the last few months of last year, the base of IT component imports will be raised in the coming months. However, despite the high base, the year-on-year growth rate of computer imports further rose to 74.2%, which may be related to the continuous import of artificial intelligence-related computers. The import of machine tools still maintained a year-on-year decline, but the decline narrowed.Export growth rate gradually slows down to low single digits

The latest trade data indicates a slowdown in trade growth from previous high levels. Major external survey data, such as the new orders index for manufacturing in developed markets and the new export orders index for emerging markets, have both weakened. The new export orders index of China's National Bureau of Statistics PMI and the new orders index of Caixin PMI have also weakened. In the Asian region, export growth in South Korea and Vietnam slowed down in September. In addition, the base for IT product exports will rise in the coming months. Overall, we believe that the export growth rate will gradually slow down. However, there may be some compensatory rebound after the end of typhoon weather in September, coupled with the base effect, which may bring a temporary increase in export growth rate. Overall, we believe that export growth may hover in the low single digits in the coming months.

Raise the forecast for the RMB exchange rate against the US dollar

In September, the RMB appreciated by 1% against the US dollar, fluctuating around 7.016 at the end of the month, mainly due to the weakening of the US dollar index in the past month, and the Chinese government introduced a series of policies and measures to stabilize growth. We recently adjusted our forecast for the RMB against the US dollar at the end of 2024 to 6.95 (previously forecasted at 7.10). Nevertheless, if there are fluctuations in market expectations for the Fed's interest rate cuts, policy support from the Chinese government, and the performance of macroeconomic data, the RMB may still face depreciation pressure and experience short-term fluctuations.