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China's August import slump raises concerns over sharper slowdown

Date 08-Sep-2015
Subject China's August import slump raises concerns over sharper slowdown

BEIJING : China's August exports fell less than expected but a steeper slide in imports pointed to continuing economic weakness, adding to concerns over the health of the world's second-largest economy that have been rattling global markets. 

Exports dropped 5.5 percent from a year earlier, slightly less than a 6.0 percent decline forecast in a Reuters poll, and improving from an 8.3 percent drop in July. 

Imports shrank for a 10th consecutive month, falling 13.8 percent, far more than the poll's expected 8.2 percent, after an 8.1 percent decline in July, reflecting both lower global commodity prices and persistently sluggish demand at home. 

That left the country with a trade surplus of $60.24 billion for the month, the General Administration of Customs said on Tuesday, far higher than forecasts for $48.20 billion. 

"I'm not optimistic about the prospect of exports and it's unlikely China can achieve the export target this year," said Nie Wen, analyst at Hwabao Trust in Shanghai. "There will be at least three more reserve requirement rate cuts this year to counteract capital outflows." 

Global investors will be combing China's August data over the coming weeks to see if the economy is at risk of a hard landing. 

Though most economists believe a gradual and prolonged slowdown is more likely, a stock market crash and the unexpected 

devaluation of the yuan currency in August have heightened concerns about stability and policymaking in China. 

On Aug. 11, the People's Bank of China jolted markets by devaluing the yuan by nearly 2 percent. Economists say the devaluation may give a mild boost to Chinese exports eventually, but most did not expect it to have any impact on the August data. 

China's top economic planning agency said on Monday that exports from some sectors had seen improvement in August. 

The National Development and Reform Commission also said the 

economy will grow steadily and meet the government's annual 7 percent growth target, as the effects of supportive policies, including local government debt swaps, rate cuts and real estate market stimulus, feed in over the next few months. 

China's top financial officials told the meeting of the Group of 20 leading economies late last week that the yuan is not on course for long-term devaluation. They have described the August move as a free-market reform. 

In recent years, the stronger yuan has hurt China's exports while helping make imports more affordable for Chinese firms and consumers. 

However, some economists believe current economic growth rates are already much weaker than official data suggest, and many traders believe there is political pressure to allow a deeper depreciation in coming months as the economy slows. 

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