China’s export and import growth in September exceeded expectations. Exports increased by 8.3% year-on-year, while imports rose by 7.4%. In local currency, exports and imports grew by 8.4% and 7.5%, respectively. As a result, China’s trade surplus decreased to USD 90.45 billion, down from USD 102.33 billion in August. Exports to the US have fallen for the sixth month in a row, dropping by 27% compared to last year. However, strong demand from other countries helped boost overall export numbers. Markets like South Africa, India, the EU, and ASEAN countries showed significant growth. Key exports, including ships, semiconductors, and motor vehicles, experienced double-digit growth.

Changes In Export Categories

On the other hand, some products like consumer goods and commodities, such as refined petroleum and steel/iron products, saw decreases. Rare earth exports also dropped, with shipments down 30.9% to 4,000 tons in September. These changes reflect shifting global market demands and ongoing tensions with the US impacting these categories. The strong export and import data for September indicates that China’s economy may be more robust than previously thought. With non-US markets driving this strength, we can expect the Chinese yuan to remain resilient against a range of currencies, though it may struggle against the dollar. This opens the door for call options on CNH against the euro or yen in the short term. China’s significant rise in imports suggests strong domestic demand, which bodes well for industrial commodities. We might consider taking long positions on copper and iron ore futures, as the data contradicts recent concerns about a slowing industrial sector. Recent satellite data shows manufacturing activity has hit a six-month high, and copper inventories on the LME recently fell to their lowest point of the year.

Divergence In Export Sector Performance

The data reveals a clear divide between booming high-tech exports and declining low-end consumer goods. This trend underscores China’s rise as the world’s leading auto exporter in 2023, driven by electric vehicles. We should explore derivative strategies favoring Chinese automotive and semiconductor stocks over traditional manufacturers like garments and toys. While overall exports remain strong, the ongoing decline in shipments to the US points to lasting supply chain changes. Although the rate of decline is slowing, the trend of reducing reliance on US demand is crucial for long-term investments. This structural shift has been gaining speed since 2024, so we should be cautious about companies heavily dependent on US consumer spending. The sharp decline in rare earth exports sends a political message we must heed, likely leading to short-term market fluctuations. This could foreshadow further export controls that would impact global tech and defense supply chains. We might want to consider buying volatility through options on ETFs tracking the semiconductor and green energy sectors, as these areas rely heavily on rare earth materials. Create your live VT Markets account and start trading now.

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