China trade surplus hits new high, but exports to Hong Kong fall

China's trade surplus hit a record high last month to beat forecasts as exports to major trading partners grew sharply, but exports to Hong Kong fell unexpectedly.

The nation's exports to the city fell 2.1 per cent from a year earlier, compared with 13.3 per cent growth in July. In comparison, shipments to most of China's trading partners grew during the period. Year-on-year growth to the US, Europe and Asean nations rose 11.4 per cent, 12.5 per cent and 13 per cent respectively.

The nation's overall exports recorded stronger-than-expected growth, with shipments up by 9.4 per cent year-on-year on the back of improving external demand. Yet imports went the opposite way, falling 2.4 per cent from a year earlier, due to weak domestic orders. The trade surplus hit US$49.8 billion.

Economists were divided on the reasons behind the unexpected decline in exports to Hong Kong, which has been an important transshipment stop for most Chinese goods on their way to the outside world and a re-export centre for mainland firms selling processed goods.

"The uncertain outlook for the global economy weighs upon processing exports [slowing visibly from 11 per cent year-on-year previously to 1.6 per cent year-on-year], leading to a sharp deterioration in exports to Hong Kong and Korea," said UBS economists led by Tao Wang.

It has been a tradition for Chinese firms to import raw materials or semi-manufactured goods from or through Hong Kong for processing and then export the processed goods through Hong Kong to Western clients.

Eliza Liu, an economist at CCB International, said the decline was probably because arbitrage trade between the mainland and Hong Kong slowed in the past months as expectations of currency appreciation eased.