The recent spike in China's exports took many by surprise. According to the official sources, China's exports in September grew by some 10% from a year earlier - about 2% higher than expected. A great deal of that increase came from iPhones, iPads, Android phones, and other popular electronics orders.
Scroll to see expors by month (Source: tradingeconomics.com)
One fact that some analysts have overlooked however is that the key driver of China's export growth (and ultimately the GDP growth) continues to be the US.
Xinhua: - During [the Jan.-Sept (YTD)] period, trade with the European Union, China's largest trade partner, fell 2.7 percent year on year to 410.99 billion U.S. dollars, the figures showed.In fact in Q3 (for the first time in years) the US has once again become China's largest export market - now larger than exports to the EU.
... China's trade with Japan dipped 1.8 percent to 248.76 billion U.S. dollars, faster than the 1.4 percent decline recorded in the first eight months
Trade with the United States, the country's second largest trade partner, increased 9.1 percent to 355.42 billion U.S. dollars.
|China monthly exports to the US and the EU (Source: China Customs; NSA; USD MM)|
China's dependence on exports to the US has largely become entrenched in the past decade, as the US rapidly shifted its Asian import portfolio from being dominated by Japan to largely concentrated in China.
|Source: Barclays Capital|
With Japan's and the EU's growth stalled, China's recovery is now even more linked to the success of the US turning its economy around. And with the US growth potentially stabilizing (see discussion), investors have turned somewhat bullish on China.
CNBC: - What a difference a quarter makes. After months of jitters over a possible hard landing in China, market watchers are quickly turning optimistic on the outlook for the world’s second largest economy following a spate of reassuring data this week.But any hint of an economic slowdown in the US, and the "months of jitters" will return. As much as China has tried to shift more of its economy to domestic consumption, at least for now it is still heavily dependent on making iPhones, etc. for the US markets. China certainly can not afford to see a disruption in its export sector. That's why it shouldn't come as a surprise that Beijing is keenly interested in the outcome of the US elections (see discussion).