China’s foreign trade performance worsened last month, with both exports and imports falling on an annual basis, customs officials said yesterday, spelling more worry for the world’s second-largest economy.
Exports plunged 8.3 percent year-on-year to US$195.10 billion, while imports dropped 8.1 percent to US$152.07 billion, the Chinese General Administration of Customs said in a statement on its Web site.
The country still recorded a trade surplus of US$43.03 billion, the agency said, but gave no comparative figure. Separately, the agency said the trade surplus in yuan terms narrowed by 10 percent on the year. Exports are a key driver of China’s economic growth, while falling imports can indicate weak domestic demand.
“China’s trade slump deteriorated further in July,” an Australia and New Zealand Banking Group (ANZ) analyst said in a research note. As global growth moderates and commodity prices remain depressed, he said, it will be “unlikely” that China’s trade growth will pick up significantly in the remainder of the year.
“China’s exports will continue to face strong headwinds,” ANZ said.
The latest trade figures worsened from June, when exports in US dollar terms eked out a 2.8 percent annual rise and imports still fell, but a lesser 6.1 percent, previous data showed.
A stronger yuan, which makes Chinese goods more expensive overseas, has hurt exports, analysts said.
“The yuan has been stronger against the euro, and it’s hurting Chinese exports to Europe,” Bocom International Holdings Co (交銀國際控股) Beijing-based economist Li Miaoxian (李苗獻) was quoted by Bloomberg News as saying.
Some analysts expect foreign trade to remain weak in the third quarter of the year, highlighting the need for the government to take more steps to boost the economy by further monetary and fiscal loosening.
“I do believe the trade data in the third quarter will have the same weakening trend on-year as overall economic growth, which we estimate will stand at 6.9 percent [for the quarter],” Nomura International PLC China economist Wendy Chen (陳家瑤) told reporters.
Meanwhile, China’s steel exports climbed to the highest level since January, adding to a surplus hurting global producers and prompting trade disputes worldwide.
Shipments surged by 9.5 percent to 9.73 million tonnes last month from June and were up from 8.1 million tonnes a year earlier, customs data show. That was the third-highest total ever. Sales rose 27 percent to 62.13 million tonnes in the first seven months.
“It’s because of weakness in domestic steel demand, which has led mills to push their excess out into the international market, and that’s something which is not going to change,” Citigroup Inc Hong Kong-based commodities strategist Ivan Szpakowski said by telephone yesterday.
China is set for its slowest expansion since 1990, as the economy grew 7 percent in each of the first two quarters of the year. Steel demand is poised to shrink this year and next for the first annual contractions since 1995 amid a property slump, according to the World Steel Association.
With steel mills maintaining output, exports might rise to 111 million tonnes this year, Macquarie Group Ltd commodities research head Colin Hamilton said.
Additional reporting by Bloomberg
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