China's imports surged in October as exports grew at their slowest rate in months, suggesting efforts to tilt the economy towards domestic demand may be offsetting the external weakness that has dragged on economic growth this year. Customs figures showed import growth of 28.7 percent year on year in October, well ahead of the 23.0 percent forecast and far in excess of September's 20.9 percent growth rate.
Headline growth in exports meanwhile was its most sluggish in eight months, but strip out the traditionally volatile month of February and October's growth of 15.9 percent was the slowest since November 2009 when they shrank. "We were expecting quite a deceleration as external demand continues to decline in Western economies," said Donna Kwok, an economist at HSBC in Hong Kong. "But the key thing to look at here is the strength of the domestic demand factors as imports grew nearly 29 percent."
Markets showed scant reaction to the data since investment sentiment is being driven by events in Europe. Imports from all three of China's key trading partners surged. The rate of import growth from the United States accelerated the fastest at 20.5 percent over a year earlier, jumping by 7.6 percentage points from September's pace. Imports from resource-rich Australia grew at 36.7 percent versus September's 33.4 percent, while European Union imports rose 28.2 percent versus 25.7 percent previously.
The surprise imports surge limited October's trade surplus to $17 billion, much lower than a forecast for $24.9 billion. That may go some way to satisfying critics who say China keeps its currency weak to support exports - despite evidence to the contrary in the form of an appreciation of the yuan of some 40 percent in real effective exchange rate terms since 2005 when Beijing abandoned a long-standing currency peg.
Indeed, China's trade surplus is on track to narrow for a third straight year from $183 billion in 2010. China's government has been working hard to wean the world's number two economy off of what many analysts say is an addiction to export-led growth.
The rate of fixed asset investment growth - a principal driver of economic expansion in China - was running at 24.9 percent year on year in the first 10 months of 2011, data showed on Wednesday, again underscoring domestic economic resilience.
The rate of growth of China's exports to the European Union and Australia both declined year-on-year in October versus September, according to Reuters calculations - down to 7.5 percent from 9.8 percent and to 16.1 percent from 21.4 percent, respectively. Exports to the United States meanwhile increased by 13.9 percent year-on-year in October versus September's 11.6 percent expansion.
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