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China trade: 4 takeaways from August’s data as exports fell for a fourth consecutive month

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Matching the overall fall, exports to most of China’s major trading partners also continued to shrink, although the declines narrowed from July.

Exports to the Association of Southeast Asian Nations (Asean) – China’s largest trade partner – fell by 13.25 per cent compared with a year earlier, marking the fourth consecutive monthly decline.

China’s exports tumble for fourth consecutive month, headwinds to remain

Shipments to the European Union fell by 19.58 per cent, year on year, while shipments to the United States dropped for the 13th consecutive month after falling by 9.53 per cent.

According to Goldman Sachs, China’s customs authorities said that automobile export growth remained strong.

Steel exports rose sharply on a sequential basis, according to analysts at Oxford Economics, as firms offload excess supply on weak housing demand to underscore the “dichotomy between domestic housing completions (a policy priority) and housing starts (still weak)”.

2. Import improvement set to continue

China’s imports fell by 7.3 per cent in August, year on year, to US$216.5 billion.

The decline also narrowed from a 12.4 per cent decline in July and exceeded expectations from Wind for a drop of 8.2 per cent.

Import volumes picked up, and this trend is likely to persist in the coming months

Capital Economics

“Import volumes picked up, and this trend is likely to persist in the coming months as a recovery in construction activity and international travel boost commodity demand,” added Capital Economics.

China’s imports from the US in August fell by 7.89 per cent, year on year, while imports from the Asean bloc fell by 6.11 per cent last month compared with a year earlier.

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According to Goldman Sachs, China’s customs authorities said that the value of imported commodities fell amid a drop in prices.

There were, though, encouraging signs that consumer demand could be picking up due to stimulus measures, said analysts at Oxford Economics, as imports of consumer discretionary items were “more mixed than bad in August”.

3. Trade surplus declines

China’s total trade surplus in August stood at US$68.4 billion, down from US$80.6 billion in July.

The surplus narrowed as imports accelerated more than exports, according to Goldman Sachs.

China’s customs authorities highlighted an expanding trade surplus with the Asean bloc, while China’s trade surplus with the US and European Union declined, the analysts added.

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4. Has China’s trade growth already hit the bottom?

Analysts expect China’s exports to decline over the coming months before bottoming out toward the end of the year.

“Most measures of export orders point to a more substantial pullback in foreign demand than has so far been reflected in the customs data. And although consumer spending in developed economies has been resilient recently, the near-term outlook for global goods consumption remains challenging, given that the prop from the pandemic is still unwinding and that the impact of monetary tightening has yet to be fully felt,” said Capital Economics.

But they expect imports to recover further in the coming months, with progress on existing housing projects and a rise in infrastructure spending set to boost construction activity.

Demand for commodities is also expected to increase due to the ongoing revival of international travel to and from China.

Whether China’s trade growth has already hit the bottom will hinge on several factors

Zhou Hao

“While China’s August trade figures came in slightly better than expected, the overall momentum remains lukewarm. In general, the figures still suggest the headwinds remain despite some marginal improvement,” said Zhou Hao, chief economist at Guotai Junan International.

“Looking ahead, whether China’s trade growth has already hit the bottom will hinge on several factors. The most important one is obviously domestic demand, [and] the recent property easing might provide some support in the short term.

“In the meantime, rising oil prices suggest that the import growth in value terms might pick up somewhat in the foreseeable future.”

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