- China Exports Fall Most in Seven Months
China’s exports dropped the most since February as global demand remained tepid, adding to pressure to the yuan, which is near a six-year low.
Key Points
- Exports fell 10 percent from a year earlier in September, the customs administration said Thursday
- Imports declined 1.9 percent
- In yuan terms, shipments declined 5.6 percent, imports rose 2.2 percent
- Trade surplus fell to $42 billion
Big Picture
Lackluster trade data may increase pressure on the yuan at the same time new property curbs challenge the resilience of the nation’s economic recovery. Third-quarter growth probably held up at 6.7 percent for a third straight quarter, according to a Bloomberg survey of economists before the official report due Oct. 19.
Economist Takeaways
The data are “consistent with a significant slowdown in global trade volumes,” said Sue Trinh, head of Asia FX strategy at RBC Capital Markets in Hong Kong. “China is running out of options and letting the RMB go is the lowest cost option for them. We’ve seen them move in this direction after getting past the formal SDR inclusion date. There’s more work to do.”
“The numbers cut against the view that stronger competitiveness from a weaker yuan and more demand as U.S. households strengthen will return exports to a growth path,” Bloomberg Intelligence economists Fielding Chen and Tom Orlik wrote in a report. For the yuan, “shrinking exports will add to fears it has further to fall.”
“The export backdrop merely underlines some of the downside risks to GDP growth,” said Michael Every, head of financial markets research at Rabobank in Hong Kong. “Expect the yuan to move down with it. China is still being kept afloat by a housing bubble and massive state stimulus.”
“The expectation of a weaker yuan won’t have a big impact on trade in the next two months, since the effect of depreciation on trade is diminishing,” said Zhu Qibing, chief macro economy analyst at BOCI International (China) Ltd. in Beijing. “Exports are likely to return to positive in October at the earliest as Christmas orders come in.”
Falling exports to the European Union and U.K. suggest the downside risks to China’s economic recovery from Brexit can’t be ignored, said David Qu, a markets economist at Australia & New Zealand Banking Group Ltd. in Shanghai.
The Details
- Exports to EU fell 9.8 percent, U.K. shipments slid 10.8 percent, U.S. down 8.1 percent
- Crude oil imports rose to a record as a new strategic reserve site became operational
- Steel exports shrank for a third month to the lowest since February
- Yuan depreciation’s impact on trade is limited, customs spokesman says at a briefing
- Yuan has dropped 3.4 percent against the dollar this year, the biggest decline in Asia, and weakened 6.2 percent against a 13-currency trade-weighted index
- The People’s Bank of China on Thursday weakened the daily reference rate for the seventh day in a row, the longest weakening run since January
