China recorded deflation for the first time since October 2009. Its headline CPI contracted -0.5 per cent y/y in November, compared with consensus of a flat reading and a +0.5 per cent gain in October.

Separately, China’s trade surplus widened sharply to $ 75.4B in November, beating consensus of 53.8B and October’s 58.4B. Exports jumped +21.1 per cent y/y, accelerating from +11.4 per cent.

Geographically, exports to the US jumped +46.1 per cent y/y in November, following a +22.5 per cent growth in October. Export growth to ASEAN also accelerated to +10 per cent y/y from +7.3 per cent in October. Exports to EU expanded +8.6 per cent y/y in November, after contacting -7 per cent in the prior month. Shipments of pandemic-related goods expanded last month, resulting from the resurgence of coronavirus cases globally. Exports of textile & fabric goods rose +21 per cent yy, up from +14.8 per cent in October. Meanwhile, exports of plastic articles jumped +112.9 per cent y/y, following a +97.9 per cent growth in October. Regarding working from home-related goods, exports in automatic data processing machines accelerated to +34.3 per cent y/y in November from +26.7 per cent in the prior month. Meanwhile, exports of plastic articles jumped +112.9% y/y, following a +97.9 per cent growth in October.

The sharp widening in trade surplus in November was driven by the strong rise in exports. This could be driven by front-loading of demand amidst concerns over the possibility of further lockdown measures. For now, we believe the strength in exports was an one-off event, rather than a trend in coming months.