CHINA’S REBALANCING ACT

CHINA WELL PLACED SHOULD EUROPE DERAIL

Clyde Russell

The Economic Times, November 10, 2011

It's becoming very hard to sustain a bearish view of China's economy with data showing solid demand in commodity imports offsetting some weakness in manufactured exports.

The main takeaway from Thursday's trade numbers is that the Chinese economy appears to be successfully balancing away from export-led growth to a more sustainable path based on domestic investment and consumption.

But let's be honest, the unfolding train wreck that is Europe is currently drowning out any positive news from Asia, and the new concern for the world's main economic bright spot is that it will be unable to escape the fallout from a potential messy break up of the euro currency bloc.

It would be silly to pretend that a prolonged crisis in Europe won't impact China, so the question becomes how well-placed is the world's largest commodity user to handle the increasing likelihood of a renewed recession in its largest trading partner.

Firstly, Chinese exports to Europe won't drop off a cliff in all but the doomsday scenario.

What is likely is that the growth in exports will decline, as indicated by the October trade figures, where shipments to Europe increased by 7.5 percent year-on-year, the lowest since February and well below the overall rate of 15.9 percent for all exports.

That overall rate was also possibly a disappointment, coming in shy of the forecast gain of 16.5 percent and the 17.1 percent jump recorded in September.

But imports surged in October, jumping 28.7 percent on the year, comfortably beating the forecast for a 23 percent jump and September's 20.9 percent increase.

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