China’s September trade growth weaker than expected, failing to retain recovery
Exports fell 10 per cent last month year-on-year
China’s trade growth underperformed expectations and failed to retain its modest recovery in September, as what was once a pillar of the country’s economy continued to lose steam.
A larger-than-expected drop in exports and a return to a fall in imports resulted in a shrinking trade surplus and added pressure to stocks and an already weakening yuan.
Exports fell 10 per cent in September from the same month a year earlier in dollar terms, much larger than a decline of 2.8 per cent in August and compared with an expected drop of 3.3 per cent.
Imports dropped 1.9 per cent, after rising unexpectedly for the first time in nearly two years in August due to rebounding demand for coal and other commodities.
The import growth was lower than the market consensus of a 0.6 per cent rise reported by Bloomberg. It reversed from a gain of 1.5 per cent in August but the deceleration was smaller than a fall of 12.5 per cent in July.
The trade surplus in September narrowed to US$41.99 billion from August’s US$52.05 billion, which was also lower than expected.
Hong Kong stocks extended losses after the data release. The benchmark Hang Seng Index fell 1.5 per cent in the late morning, extending losses from a drop of 1 per cent following the release. The yuan further weakened on Thursday, with the onshore yuan/dollar rate weakening to 6.7271 from Wednesday’s close of 6.7180.
Strengthened speculation on a near-term rate hike by the Federal Reserve have sent the dollar index high and added pressure on the yuan. The People’s Bank of China allowed the yuan to break 6.7 – a key psychological level – against the greenback, in a sign it will tolerate more volatility.
The General Administration of Customs said on Thursday that the overall trade situation still faced difficulties, while an index to measure to the prospect of exports rose for the third month in September, indicating export pressure may ease in the fourth quarter.
“Goods exports disappointed in September, breaking – at least for now – a trend of reasonable real export growth and underscoring that the trend towards somewhat stronger global demand growth is going to be gradual and susceptible to setbacks,” said Louis Kuijs, head of Asia economics at Oxford Economics.
Taking falling import prices into account, Kuijs said a “tentative” improvement in imports in August continued into September.
The underperforming trade in September was in contrast to Premier Li Keqiang’s remarks in Macau on Tuesday that third-quarter economic performance was better than expected, and indicated such an improvement could be short-lived.
“Import orders blew out recently, and we are much busier than earlier this year,” said a trader for manganese ore and chrome ore with a global commodity firm. “However the improvement came suddenly, and I’m suspicious whether it can be sustained.”
In addition to price and exchange rate factors, China needs to address fundamental changes in its trading patterns.
Domestically, it is losing advantage as labour costs rise amid an ageing population. Externally, its trading partners such as the United States have launched strategies to attract the return of manufacturing to counter their own slowdowns, adding pressure to China’s processing trade growth, said Li Wei, an economist with the Commonwealth Bank of Australia.
Customs spokesman Huang Songping told a press conference on Thursday that China risks exacerbating trade conflicts amid growing global trade protectionism.