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Chinese exports declined way over initial expectations in July, losing 8.3 per cent in dollar terms when compared with the same period in 2014.
The data was released on Saturday by the General Administrations of Customs, overall showing a tendency for a stronger yuan and less demand from the European Union. The data fell below most analysts’ expectations, with Bloomberg predicting a 1.5 per cent decline and Wall Street Journal only a 2.2 per cent one.
Exports towards the European Union have fallen 2.5 per cent since the start of year, but a worse situation were shipment to Japan, which fell for over 10 per cent since July 2014. Bloomberg economist Tom Orlik wrote in a research note posted on Saturday that this slump in exports could bring forth further unwanted pressure on China’s economic growth.
However, economist Liu Xuezhi from Bank of Communications, one of China’s largest banks, downplayed the situation by saying that the country could no longer expect to see the same level of export as in the past, and that it just can’t be the fuel of its economic growth anymore. He pointed out towards accelerating infrastructure spending as a viable alternate solution.
One of the slump’s causes is also the rapid appreciation rate of the yuan. External demand for the currency though remains low, despite the government pushing for it to become a viable international reserve currency. As such, depreciation in favor of exports doesn’t seem to be a viable option.
The Customs report also saw China significantly increase the rate at it which buys coal: it imported over 21.26 million tons of coal last month, an increase of more than 28 per cent since June. This was mostly caused by a period of weak global prices for coal; import reached the highest level since last December.
This data comes against the backgrounds of imports also dropping in July. According to the report, Chinese imports were 8.1 per cent lower in July on an annualized basis; up from the 6.6 decrease in June. The country’s trade surplus also reached only $43 billion, below par on analyst expectations of over $55 billion.
All in all, combined with the sorry state in which its stock market has fallen lately, China is quite likely to miss its 2015 growth target of 7 per cent. The government is looking into stimulating construction with special bond sales, but only time will tell whether this can overturn the downward trend of its economic growth.
Image Source: baomoi.com
