Chinese exports are falling more steeply in September
Chinese exports fell more steeply than expected last month, highlighting the persistent weakness in global demand that is weighing on the world’s second-largest economy
September’s 10 % year-over-year drop marks the sixth consecutive monthly decline and follows a 2.8 % fall in August, the General Administration of Customs said on October 13, 2016. The drop was also markedly worse than a median forecast of a 3.2 % decline from 16 economists polled by The Wall Street Journal.
Imports, meanwhile, fell 1.9 % in September from a year earlier, reversing a 1.5 % increase in August. The import data was also weaker than expected. The falloff in imports and exports resulted in China’s trade surplus narrowing to a less-than-anticipated USD 41.99 billion in September from USD 52.05 billion in August.
“This data is disappointing and underlines that the fundamentals of the economy are still quite weak,” said Amy Yuan Zhuang, an analyst with Nordea Bank. “This will add clouds to the growth outlook.”
Growth has stabilized recently after Beijing’s decision to pursue an accommodative monetary policy and ramp up infrastructure spending, but this masks deeper problems including weak private investment, mounting corporate debt and widespread industrial overcapacity, economists said.
Ms. Zhuang and other economists said anemic global demand was the main reason for September’s weaker performance. Trade was down with all of China’s major trading partners last month. The World Trade Organization expects global trade to grow by a slack 2.8 % this year, marking a fifth straight year below 3 %.
Robust exports a year ago also made the comparison with last month appear less favourable, economists said. Another factor in September’s trade fall, some said: South Korean giant Samsung Group’s production problems and recent decision to stop selling its Galaxy Note 7 smartphone. “China is a very important part of this supply chain,” said BBVA Research economist Xia Le.
China’s overseas shipments, once an important generator of growth, have declined in 14 of the past 15 months, a drag on the broader economy, economists said. Some said they expected Beijing to further depreciate the yuan in coming months to make exports more affordable.
“This depreciation will be gradual,” said Ms. Zhuang. “They don’t want a sharp decline” that might spook investors, increase capital outflow and spur financial instability, she said. The yuan has depreciated approximately 3 % against the dollar and 6 % against a broader basket of currencies so far in 2016.
Chinatop Home Products Manufacturing Co., which exports kitchen supplies to the U.S., said sales have declined by about 10 % this year from 2015 levels. In response, the company, which is based in the southern city of Yangjiang, has cut prices by as much as 15 % and periodically borrows from banks to smooth out its cash flow. “The global economy is not very upbeat right now. And Americans aren’t buying as much as they used to,” said Chen Yangfan, a company salesman. “We hope that the economic situation will somehow recover in the fourth quarter.”
Economists said September’s import decline reflected continuing weakness in the domestic economy, with lower import volumes for major commodities such as copper and iron ore. “This could be an early sign that the recent recovery in economic activity is losing momentum, although we would caution against reading too much into a single data point,” wrote Capital Economics in a research note.
Shen Danyang, spokesman for China’s Ministry of Commerce, earlier this month said that foreign trade remained under heavy downward pressure, adding that the situation was “complicated and daunting” and there was no room for complacency, according to the official Xinhua News Agency.
Growing trade friction also hurts Chinese exports, Shen said. China has come under criticism from foreign officials who claim its companies are selling steel and other goods at prices below the cost of production. In the first eight month of the year, 20 countries or regions launched 85 trade investigations against Chinese products, a 49 % increase over year-earlier levels, led by the U.S. and India, the ministry said.