Friday 23 February 2018

China September exports fall less than expected, imports slump for eleventh month

An investor gestures in front of an electronic board showing stock information at a brokerage house, in Fuyang, Anhui province. Photo: Reuters
An investor gestures in front of an electronic board showing stock information at a brokerage house, in Fuyang, Anhui province. Photo: Reuters

China's exports fell less than expected in September, with monthly figures even showing signs of a mild recovery over the summer, but a hefty drop in imports may keep pressure on policymakers to do more to stave off a sharper economic slowdown.

Exports fell 3.7pc from the same period last year, less than a drop of 6.3pc forecast by economists in a Reuters poll and a 5.5pc decline in August.

However, imports by value tumbled for the 11th straight month, losing over 20pc year-on-year in September due to weak commodity prices and soft domestic demand, which will continue to complicate Beijing's efforts to stave off deflation.

Highlighting persistent weakness in demand at home and abroad, China's combined exports and imports fell 8.1pc in the first nine months of the year from the same period in 2014, well below the full-year official target of 6 percent growth.

"In general, there are no green shoots in this set of data," said Zhou Hao, senior economist at Commerzbank in Singapore.

"The growth of port throughput volume still remains low."

However, monthly figures were much more rosy. Exports to every major market except Taiwan rose from August, as did imports.

Julian Evans-Pritchard of Capital Economics warned that annual export readings may be distorted downward by base effects from the strong export performance at the end of 2014, which many suspected was due to yuan speculation disguised as trade.

He suggested paying closer attention to monthly trends, which show a steady rise to most major export markets in the U.S. and Europe over the summer.

"Basically, exports have been doing better since the 2nd quarter, but that recovery trend has been masked on a year-on-year basis because the second half of 2014 was so strong."

Mr Evans-Pritchard also said that import data had become unreliable given massive swings in prices due to the commodity downturn and a divergence between prices and trading volumes.

"For the major commodities like oil, copper, etc. we're actually seeing a pretty healthy trend in import volumes."

Import volumes are a leading indicator for exports in China, given a large share of materials and parts re-exported as finished goods.

"September’s import figure does not bode well for industrial production and fixed asset investment," wrote ANZ economists in a research note reacting to the figures.

"Overall growth momentum last month remained weak and Q3 GDP growth to be released next Monday  will likely have edged down to 6.4pc in the third quarter, compared with 7pc in the first half."

China posted trade surplus of $60.34bn for the month, the General Administration of Customs said on Tuesday, higher than forecasts for $46.8bn.

While the surplus is largely due to weak imports, it does help ease pressure on the country's money supply from capital outflows, the ANZ economists argued.

China is widely expected to post its slowest economic growth in a quarter of a century this year as activity is weighed down by weak demand, entrenched factory overcapacity, high debt levels and cooling investment appetite.

That is denting any remaining hopes that a recovery in China's domestic demand might offset weakness elsewhere.

In fact, developed economies are to blame for the global economic malaise because their slow recoveries were not creating enough demand, China's Finance Minister Lou Jiwei was quoted as saying on Monday.

IMF Managing Director Christine Lagarde said last week that the world could get stuck in a muddle of mediocre growth, with high debt and unemployment, unless policymakers take economic reforms more seriously.

"The latest snapshot of the global economy looks uneasily familiar: a brittle, uneven recovery, with slower-than-expected growth and increasing downside risks," Ms Lagarde said in her "Global Policy Agenda" that lays out priorities for the IMF and its 188 member countries.


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