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China's trade a mixed bag with imports up but exports down again

Date 08-Sep-2016
Subject China's trade a mixed bag with imports up but exports down again

The latest batch of Chinese trade data is something of a mixed bag, with a promising increase in imports but falling exports pointing to ongoing weakness in regional trade.

In US dollar terms, imports rose 1.5 per cent in August compared to a year ago, a significant improvement on the 12.5 per cent slump in July and well ahead of forecasts of another steep decline.

Exports fell another 2.8 per cent after the 4.4 per cent contraction in July.

However Capital Economics chief China economist Julian Evans-Pritchard said the result was better than the anticipated 4 per cent fall in exports, and showed some promise that global trade may be experiencing some renewed vigour.

"While global demand remains subdued by historic standards, there does appear to have been some pick-up recently," Mr Evans-Pritchard said.

The increase in imports — the first rise since late 2014 — points to a surprising resurgence in domestic demand, although part of the bounce can be put down to higher commodity prices.

"Nonetheless, the size of the pick-up suggests that there may also have been some improvement in import volumes last month which would add to recent positive signs on domestic demand, including better-than-expected PMI readings."

ANZ economist Raymond Yeung said a large part of the weaker exports can be attributed to a strong US dollar.

In Chinese currency terms, exports rose close to 6 per cent.

However Mr Yeung cautioned sluggish global demand would weigh on China's export and manufacturing outlook for some time with recent factory data pointing to further contraction in new export orders.

Overall China's trade balance was resilient with a solid $US52 billion surplus.

"The strong trade surpluses in July and August should help relieve the pressure on capital outflows in the third quarter and possibly the fourth," Mr Yeung said.

Unfortunately all that glitters is gold: Citi

Citi economist Josh Williamson said non-monetary gold — which basically exclude trade between central banks — has been flattering the headline trade data over recent months.

On Citi's numbers the deficit would have hit a near record $4.3 billion in July.

"However, non-monetary gold can reflect the transfer of existing bullion or gold stocks and in many cases does not result in physical delivery upon a change in ownership," Mr Williamson noted.

"Its value add to the economy is therefore overstated.

"This wouldn't be an issue if the swings in the headline data from non-monetary gold were small, as they were years ago.

"But this component is now having a larger and more persistent positive impact on the headline data.

"Unfortunately all that glitters is gold."


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