In November, China’s trade surplus jumped to a record CNY792.57 billion. This represents a significant jump from last month’s total of CNY640.40 billion. This growing surplus at the same time shines a light on the strong export performance of the country, which grew 5.7% YoY. This figure surpassed analysts’ expectations of a 3.8% increase and outperformed the previous month’s growth of 1.1%. At the same time, imports were up too, but not as much as expected, which points to a generally positive trade landscape that’s still somewhat mixed.
The impressive increase in exports is especially remarkable given it follows a 0.8% contraction reported in October. This sharp rebound indicates both China’s continued exit from pandemic and its unmatched strength in global economic competition. Year-over-year, imports were up by 1.9%. That was still below 2.8% growth we would have expected and just above last month’s increase of 1.0%. The uninflated data still tells us that demand for foreign-made goods is holding strong. It’s not growing quite as fast as exports.
Economic Implications for Australia
China’s continued robust economic performance will be the key to maintaining the good fortune enjoyed by its number one trading partner Australia. When the Chinese economy does well it spends more on raw materials, goods and services from Australia. This increase in demand devalues the AUD, pushing costs up for Australians exporting to the US. Their relationship is so symbiotic in fact, that days when Chinese growth data surprises can have immediate repercussions on the value of the AUD.
After news on China’s trade figures, the pair accordingly strengthened, boosting the AUD/USD pair on immediate reaction to around 0.6647. This surge is a result of positive market movements based on optimism about the Chinese economy and its ability to drive demand for Australian goods. If the trade data beats expectations, the AUD might move even higher. Analysts are particularly focused on the December 5 high of 0.6650 as the first line of resistance.
Future Projections and Market Reactions
China’s trade balance is on course to widen even more. In fact, in November, it will hit $100.20 billion—an increase from the October estimate of $90.07 billion. On the trade side, exports are forecast to increase 3.8%, while imports are anticipated to increase 2.8%. These projected numbers further underscore the belief that China’s economy is booming.
Though there is excitement, market analysts are still deeply concerned about impending volatility. Should the data come in weaker than expected, the AUD could see further losses stretched. It might even fall to the December 1 low of 0.6532 then the pivotal support at the 100-day EMA of 0.6520. The latest swings in trade data show the thin line that exists between strong economic performance and a strong currency.