Courtesy of ANZ comes further detail of China’s weak June trade numbers:
CHINA GROWTH WILL FURTHER DECLINE ON WEAK TRADE
After the cracking down of over-invoicing and round tripping trade since May, the Chinese trade figures unmasked the reality. June trade figures continued to trend down,reflecting that China’s external demand profile remains weak. Export contracted by 3.1% y/y and imports extended the negative growth at -0.7% y/y in June, compared with May’s 1.0% and -0.3%, respectively.
If the softness in the trade sector persists, China is unlikely to achieve its trade growth target of 8% for this year. This could be the second consecutive year that China is unable to deliver on its growth target. The declining trade performance has begun to impinge on the labour market.
Given a strong yuan relative to other Asian currencies, export competitiveness will continue to erode. With this in mind, we see a downside risk for the RMB exchange rate. In the long term, we believe the new political leadership should roll out a clear strategy to re-position China’s products within the global supply chain.
ADDITIONAL DETAILS
Export growth declined by 3.1% y/y in June, compared with market expectations of a 3.7% increase and May’s 1.0% gain.
By destination, exports to the US fell 5.4% y/y in June, from a 1.6% decline in May. Exports to the EU contracted 8.3%, from -9.7% in the previous month. Exports to Japan declined 5.1%, from -5.7%. Exports to Hong Kong fell sharply to -7.0%, from a 7.7% increase in the previous month. Exports to ASEAN rose 10.2%, while shipments to Taiwan fell 2.2%.
Import growth declined by 0.7% y/y in June, compared with 0.3% contraction in May and the market consensus of a 6.0% increase.
On a volume basis, iron ore imports increased by 6.8% y/y in June, from 7.2% in May, suggesting that China’s demand for iron ore from Australia remains soft. Crude oil imports increased 2.1%, from -6.0%. Copper imports increased 9.7%, after falling 14.5% in the prior month. Soybean imports surged 23.3%, compared with a 3.4% decline previously.
On a seasonally adjusted basis, exports increased 2.1% m/m while imports increased 3.2%.
The trade surplus widened to USD27.12bn in June, from USD20.42bn.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
