China’s Exports Buoy Growth as IPhone Inflates Imports

China’s slowing economy received a shot in the arm from faster export growth in September, with external demand spilling over to boost imports for processing and re-shipment of goods such as the iPhone 6.

Exports increased 15.3 percent from a year earlier, the biggest increase since February 2013 and beating the 12 percent median estimate in a Bloomberg survey of analysts. Imports rose 7 percent, against projections for a 2 percent decline, leaving a trade surplus of about $31 billion, data from the Beijing-based customs administration today showed.

Stronger exports will help China weather a property slump even as the global outlook becomes more clouded, with Federal Reserve officials highlighting concern about the improving U.S. economy’s ability to withstand foreign weakness. A surge in imports for processing and re-export suggested domestic demand remains subdued, while a 34 percent increase in shipments to Hong Kong reignited speculation that figures are inflated.

“Import growth in September is heavily driven by external demand and the processing trade industry, instead of domestic demand,” said Le Xia, Chief Asia Economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong, with iPhone production one component of that. “China’s economy at the current stage is still kind of externally demand-driven.”

Chinese stocks maintained declines after the data. The Shanghai Composite Index fell 0.4 percent at the close while the Hang Seng China Enterprises Index was down 0.2 percent.

The iPhone 6 has “positive impacts on processing trade,” Zheng Yuesheng, a spokesman for the customs agency, said after a press briefing in Beijing today. The customs department of Zhengzhou, where the iPhone factory is located, reported 6.22 million exports of new iPhone models by Sept. 21, according to a report by China News Service, a state news agency.

‘Export Growth’

The increase in exports follows a previously reported 9.4 percent jump in August and compares with analysts’ estimates for gains ranging from 7.7 percent to 16.6 percent. The surge was boosted by weakness in the year-earlier period, when shipments fell 0.3 percent, according to previously reported data.

Apple Inc.’s new version of the iPhone may boost China’s exports by about 1 percent a month for the rest of 2014, Bank of America Corp. economists led by Lu Ting in Hong Kong said in a note last month.

The increase in exports to Hong Kong helped the territory overtaking the U.S. in the month to be the top destination for Chinese shipments. That coincided with renewed appreciation of China’s currency, triggering “concerns that speculative trade flows to ride on RMB appreciation could have reemerged,” economists led by Liu Li-Gang at Australia & New Zealand Banking Group Ltd. wrote.

Hong Kong

“The trade development between Hong Kong and Mainland China needs to be closely monitored,” ANZ’s economists said.

The customs administration didn’t immediately respond to faxed questions on speculation of distorted figures.

A discrepancy between Hong Kong data for imports from China and Chinese figures for exports to the city in early 2013 highlighted the practice of over-invoicing that inflated China’s export data. Inflated invoices had been used to disguise capital inflows to bet on China’s rising currency.

Analysts forecast China’s expansion this year will moderate to 7.3 percent, the slowest since 1990, and to 7 percent in 2015.

Central bank Governor Zhou Xiaochuan said over the weekend that the economy “will continue to expand at a steady pace.” While expediting spending, boosting infrastructure building and relaxing property curbs, Premier Li Keqiang has refrained from broad-based stimulus, saying China prefers reform to boost the economy.

“Today’s data is less good news than it appears,” Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong, said in a note. “It suggests that China’s export growth is holding up. However, the important caveat coming from the breakdown of the import data suggests that demand growth in China’s own economy remains weak.”

— With assistance by Xiaoqing Pi, and Xin Zhou

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE