Flagging demand saps China's trade
China's foreign trade lost steam last month as external and internal headwinds crimped demand, piling pressure on the government to step up measures to bolster the flagging momentum.
Exports rose 11.3 per cent from a year ago to US$180.21 billion last month, slowing from the 15.3 per cent increase in May, according to the General Administration of Customs.
Imports, meanwhile, were up just 6.3 per cent to US$148.48 billion in June, down sharply from the 12.7 per cent increase the previous month, official data released yesterday show.
The trade surplus in June widened by 42.9 per cent year on year to US$31.73 billion, lending some support to the yuan. The currency fell 0.88 per cent from April through June, the biggest quarterly drop since a US dollar peg ended in 2005.
For the first half of this year, exports grew 9.2 per cent and inbound shipments rose 6.7 per cent.
'External demand will remain sluggish, with exports likely to maintain single-digit growth in the second half of this year,' HSBC economist Qu Hongbin said. 'Internal demand is lacklustre, calling for further measures to boost the economy.'
Customs authorities said the mainland's trade with the European Union (EU) and Japan almost stalled in the first half of this year but was offset by the steady growth of trade with emerging economies.
The US surpassed the EU to become the biggest destination for mainland exports in the first six months, with shipments up 13.6 per cent year on year to US$165.32 billion. But shipments to the US in June itself grew just 10.6 per cent compared with 23 per cent in May.
Exports to the EU fell from a 3.4 per cent growth in May to a 1.1 per cent drop last month, while those to Japan cooled from a 13 per cent growth in May to just 0.1 per cent in June.
Imports cooled significantly last month. On a year-on-year basis, import growth of iron ore geared down from 19.8 per cent in May to 14.1 per cent last month, while crude oil slowed from 18.2 per cent to 10.3 per cent and copper from 64.8 per cent to 23.6 per cent.
Nomura Securities economist Zhang Zhiwei said: 'Lower commodity prices contributed to weaker imports, but the price effect does not seem to be the whole story. It appears both external and domestic demand slowed.'
Macro data on the second-quarter gross domestic product and June activities, to be released on Friday, might surprise on the downside, Zhang said. He added the pace of policy easing was expected to pick up in the near term, including a cut in the reserve requirement ratio this month and bank lending increase in coming months.
Bank of America-Merrill Lynch economist Lu Ting said the slowdown in export growth from 24 per cent in the first half of 2011 to 17.4 per cent in the second to 9.2 per cent in the first half of this year was a major drag on economic growth, contributing about 1.5 percentage points to the growth slowdown.
Many economists have predicted the April-June GDP growth would be lower than 8 per cent, the slowest pace in more than three years.
China must maintain 'reasonable investment growth' to spur the economy and stand up to global and domestic challenges, Premier Wen Jiabao told economists in his meetings with them in the past two days.
'The measures to stabilise economic growth include boosting consumption and diversifying exports, but currently, what is important is to pursue a reasonable growth of investment,' Wen said.