Business World

Sunday 19 November 2017

Shock fall in China's June exports stokes global trade fears

Government pressure mounts with slowdown in the spotlight

Langi Chiang and Kevin Yao

CHINA warned on Wednesday of a "grim" outlook for trade after a surprise fall in exports in June, the first since January 2012. It raised fresh concerns about the extent of the slowdown in the world's second-largest economy, increasing the pressure on the government to act.

China's reform-minded new leaders, including Premier Li Keqiang, have shown a tolerance for slower growth while pressing ahead with efforts to revamp the economy for the longer term, but any continued slide in economic performance could test their resolve.

The customs data showed that exports fell 3.1pc in June against forecasts for a rise of 4pc, casting a shadow over second-quarter GDP figures due on Monday that are already expected to show growth slowed down to 7.5pc as weak demand dented factory output and the pace of investment.

"Next week will be a testing time for the government in revealing just how much of a growth slowdown it is willing to tolerate," Zhiwei Zhang, China chief economist at Nomura in Hong Kong, said in a client note.

WORRIES

Chinese exports were down 0.7pc compared to an expected 8pc rise. China had a trade surplus of €21bn in the month, the customs administration said, in line with expectations.

Worries about Chinese demand for Australian commodities, such as iron ore and coal, saw the Australian dollar fall about a third of a cent on the news.

The MSCI Asia-Pacific ex-Japan index also pulled back before recovering to stand up 0.77pc in late Asian trade.

The June export figures followed a government crackdown on the use of fake invoicing that had exaggerated exports earlier this year, and may now reflect the true trade picture, customs officials said.

However, the external environment remains weak, and rising labour costs and a stronger yuan currency were discouraging exporters, customs said.

"China faces relatively stern challenges in trade currently," customs spokesman Zheng Yuesheng told a news briefing. "Exports in the third quarter look grim."

Exports to the United States fell 5.4pc, while exports to the European Union dropped 8.3pc.

Irish Independent

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