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(By EM) China’s exports surprised on the upside but bank loans fell, forcing companies to find alternative ways to raise cash

Chinese exports rose by 11.6% year-on-year in October from September’s 9.9% increase, beating market expectations of a 10% rise, with sales of goods to both the US and the European Union improving.

Exports to the US grew by 9% year-on-year from September’s 5.5% increase. Exports to the European Union shrank at a slower pace of 8.1% from September’s 10.7% fall. Exports to the ASEAN economies jumped by 44%.

“I think in general the export figures for the last couple of months were good,” Qinwei Wang, China economist at Capital Economics, told Emerging Markets. “We saw good export numbers from other countries in the region too, for instance Korea’s exports were better than expected.”

While the improvement to exports to the US could have been partly attributed to the sales of Apple’s iPhone and iPad, exports to emerging markets from China were also better, he noted.

“This seems to show the environment has improved slightly,” Wang said, but added that there was “no convincing evidence” that the improvement was sustainable, given the outlook for the global economy.

The increase in imports, by contrast, was just 2.4%, lower than expectations of 3.4%.
“Import volume of copper remained on a downward trend, and demand for iron ore continued to move sideways. This is consistent with lack of recovery in manufacturing investment so far, due to high inventory levels and excess capacity,” Societe Generale’s China analyst Wei Yao said.

“In addition, car imports were still affected by geopolitical tensions and contracted 26.4% year-on-year and nearly 40% from the level in August,” Yao added.

NEW LOANS FALL

New loans from banks, which many analysts look to in order to gauge the direction of the Chinese economy, disappointed as they were just 505 billion yuan ($80.8 billion) versus expectations of 590 billion yuan and down from September’s 623 billion yuan.

“It seems that the People’s Bank of China does intend to cap the full-year bank lending below 8.5 trillion,” said Yao.

Wang noted that “this is the second month we’ve seen weak bank loans” but that they were offset by non-bank credit to some extent.

In year-on-year terms, trust loans increased by 144.5 billion yuan compared with October 2011’s 9 billion yuan but less than September’s 202.4 billion yuan.

“This was also the case with entrust loans and banks’ acceptance bills. Hence, the year-on-year increase in new nonbank credit more than compensated the year-on-year decline in new bank loans,” said Yao.

Other types of loans, such as corporate bond issuance, have also increased.

“The Chinese government control bank lending, so companies have looked for other channels [to raise funds],” Wang said.

The overall growth of credit “remained accommodative” said Yao, noting that the total credit stock growth accelerated to 20.1% year-on-year last month from September’s 19.7%.

“This is half of the peak level reached in late 2009, but already twice the speed of nominal GDP growth,” she added.