China's imports, exports soar for the fourth consecutive month

Published 08.08.2016 14:33
A shipping container is unloaded at a port area in Lianyungang, Jiangsu province, China, August 8, 2016. (Reuters Photo)
A shipping container is unloaded at a port area in Lianyungang, Jiangsu province, China, August 8, 2016. (Reuters Photo)

China's exports fell again in July by an unexpectedly wide margin while a decline in imports accelerated in a possible sign of weakness in the world's second-largest economy.

Exports contracted 4.4 percent to $184.7 billion, a slight improvement over June's 4.8 percent contraction, customs data showed Monday. Imports fell 12.5 percent to $132.4 billion, accelerating from a decline of 8.4 percent.

July was the fourth month in a row that exports declined in dollar terms, and analysts described the figures as disappointing.

The drop in imports was significantly larger than expectations for a 7.0 percent fall, the median forecast in a survey of economists by Bloomberg News. Compared with expectations of a 3.5 percent decline, exports also fell beyond expectations.

Weak global demand has hampered efforts to shore up Chinese trade and stave off job losses in export industries. The contraction in imports reflects possible weakness in the domestic economy, but the figures also are depressed by a decline in prices of oil and other commodities.

Chinese economic growth held steady at 6.7 percent in the quarter ending in June compared with a year earlier, though that was the lowest quarterly level since the aftermath of the 2008 global crisis.

The declines in both exports and imports were worse than many forecasters expected.

"The data dash hopes that a pick-up in global manufacturing growth last month might have buoyed shipments from China," said Julian Evans-Pritchard of Capital Economics in a report.

"The country's export growth is likely to remain subdued for some time," said Evans-Pritchard. "While we think the worst is probably over for many emerging markets, global growth is likely to remain lackluster well into next year."

The slump in imports meant China's global trade surplus swelled by 22 percent from the same month a year ago to $52.3 billion.

China's trade surplus with the European Union, its biggest trading partner, was $11.8 billion. The surplus with the United States was $24.7 billion.

Even taking lower prices into account, the Chinese figures suggest imports fell by 5.3 percent, according to Louis Kuijs of Oxford Economics.

"It implies that volumes dropped substantially month on month," said Kuijs in a report. "It may herald that domestic demand started to slow down in July."

As the world's biggest trader in goods, China is crucial to the global economy and its performance affects partners from Australia to Zambia, which have been battered by its slowing growth, while it faces headwinds itself in key developed markets.

China's imports have been shrinking since late 2014 with global raw material costs hammered as the country's once blistering expansion lost steam, hurt by manufacturing overcapacity, a slowing property market and mounting debt.

July saw imports fall by the most since February, when they lost 13.8 percent.

"China's trade data was unimpressive in July," ANZ Banking Group said in a research note, which added the outlook for the second half of the year was "challenging".

"Over H2 2016, sluggish growth in Europe and Japan is likely to drag on China's exports. Brexit will further weigh on exports to the EU," it said, referring to Britain's vote to leave the European Union.

Yuan depreciation

In the first seven months of the year, total trade volume with the EU -- China's biggest trading partner -- rose 1.8 percent, Customs said in a statement.

Trade with Japan was up just 0.8 percent, but it fell 4.8 percent with the United States, data showed.

China is embroiled in rows over steel exports -- it produces around half the world's output of the metal -- with the EU and US accusing it of dumping. It exported 10.3 million tonnes of steel in July, Customs said, up 5.86 percent year-on-year but down 5.85 percent on June.

But stock investors ignored the weak trade performance, with the benchmark Shanghai Composite index closing up nearly one percent on Monday.

July's fall in exports came despite weakness in China's yuan currency -- also known as the renminbi (RMB) -- which has helped overseas sales by making Chinese goods cheaper.

"Yuan depreciation has helped China's exports to some degree," Citic Bank International chief economist Liao Qun told AFP.

Chinese officials deny the government is deliberately allowing the yuan to slide to boost exports, arguing economic fundamentals are responsible.

China's foreign exchange reserves, already the world's largest, stood at $3.2 trillion in July, down by just $4.1 billion from June, official figures showed Sunday.

The world's number two economy grew 6.7 percent in the second quarter of this year, the same as the first quarter, slowing from all of last year.

The economy expanded 6.9 percent in 2015 -- its weakest in a quarter of a century -- and the government has targeted growth in a range of 6.5-7.0 percent for this year.

Analysts said China will need to further ease monetary policy, such as cutting the amount of funds banks must hold in reserve, to keep growth on track.

"Trade data, especially weak import growth, are further evidence of slowing domestic momentum in July," Nomura's chief China economist Zhao Yang said in a research note.

"We maintain our view of a growth slowdown and accommodative policy bias, given weak domestic demand and still-low albeit stabilizing external demand."

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