China: the world's only hope for growth

China is growing at 8.5% to 9% at the moment: in terms of what Europe and the US can expect now and 2012, that is chalk and cheese.

And, even though the economy is slowing, China’s momentum is enough at the moment to keep much of Asia, including Australia, buoyant, unlike Europe.

But as the crushing wave of gloom and doom from Europe sweeps across the world's financial markets, cutting bank lending, freezing finance and damaging confidence, for how much longer can China stay immune?

The trick for the Chinese government is to try and get domestic consumption growing fast enough to make up for any shortfall in exports, and without re-igniting inflation.

That’s the big test for the Chinese, as they start changing leaders over the next year, a time that will be fraught with increased risks for Australia.

But Chinese inflation is falling, which is good, industrial production is easier (goodish, but still growth of 8% to 9% a year ), and yesterday we learned that the country's trade surplus rose in October, but not by as much as forecast.

The month's surplus hit $US17.0 billion, which was above September's $US14.51 billion and market forecasts of $US24.9 billion to $US25.8 billion.

Exports were 15.9% higher than a year earlier, while imports gained 28.7%. In September, exports had risen 17.1%, while imports were up 20.9%.

The government said total foreign trade fell 8.3% in the month from September as uncertainties in the US and Europe cut external demand.

But at a total of $297.95bn for the month, October's foreign trade total was still 21.6% up on the same month in 2010.

Imports fell 7.2% from September to $US157.49 billion, while imports dropped 9.5% month-on-month to $US140.46 billion.

The trade surplus of $US17.03 billion was down 36.5% year-on-year, a clear sign of the impact the slowdown in Europe and sluggish demand in the US is having on the Chinese economy.

On a yearly basis, exports were up 15.9% while imports expanded 28.7% year-on-year, the customs office said in a statement.

China’s export growth to the European Union slowed to 7.5% in October from a year earlier, against the 9.8% rise in September.

Sales to Italy fell 17.6% from a year earlier, the second straight monthly fall after the 5.1% fall in September.

China’s imports from South Korea were up 21%.

But exports to South Korea rose 9.7% in October, compared to a 34.2% gain September.

Among weak spots, Chinese exports to Canada grew 4.4% year-on-year in October, slowing sharply from September’s 11.9% growth.

Chinese exports to the US rose 13.9% October, up from 11.6% in September as the Christmas supply chain kicked up a notch for the likes of Wal Mart, Target and retailers large and small.

Imports from the US jumped 20.5% in October, the fastest rate for the past year, up 7.6% from September.

Imports from resource-rich Australia were up 36.7% from a year earlier, from September's 33.4%.

European Union imports rose 28.2% from 25.7% in September.

China's exports to the European Union and Australia both fell year-on-year in October versus September -- down to 7.5% from 9.8% and to 16.1% from 21.4%, respectively.

Chinese car sales fell for the first time in five months in October, another sign of slowing demand (and in turn that will mean a fall in demand for steel and iron ore and coking coal).

Deliveries of passenger and commercial vehicles in China eased 1.1% to 1.52 million in October, led by the 18% drop in minivan sales.

Minivans are popular with small businesses, especially in regional and rural areas where they are used to make deliveries and shift people.

Passenger sedans sales rose 2.2%, while sport-utility vehicle sales jumped 22% (they are popular in urban areas).

Production of vehicles rose 1.3% in October to a total of 1,605 million units, of which passenger vehicles amounted to 895,000.

Total vehicle production in the 10 months to October was 15.58 million, up 4.2% on the same period in 2010.

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