Yuan under pressure as exports up, imports sag
Print Edition
CHINA’S exports accelerated faster than expected in July while imports fell unexpectedly, creating a record high trade surplus that may pressure the yuan to strengthen further, data from the General Administration of Customs showed yesterday.
Exports jumped 14.5 percent from a year earlier to US$212.8 billion in July, much stronger than the pace of 7.2 percent in the previous month.
Imports, however, fell 1.6 percent to US$165.5 billion, against an increase of 5.5 percent in June.
“Exports rose more than expected thanks to improved external demand,” said Chang Chunhua, an analyst at Nomura. “Imports dropped, and it was largely due to last year’s high base and a recovery that has yet to stabilize.”
Zhu Haibin, chief economist for China at JPMorgan, said the mixed import figures pointed to some uncertainty of a rebound in the domestic economy. “As such, we expect the government to continue to roll out pro-growth measures in the coming months,” Zhu said.
Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said the decline in imports was a result of a crackdown on commodity financing after a fraud probe in Qingdao port, while the high base last year also distorted the figures.
As growth of exports exceeded that of imports significantly, they were translated into a record high trade surplus of US$47.3 billion in July, sharply up from June’s US$31.5 billion and tripling that a year ago.
“China’s trade surplus reached a record high,” ANZ’s Zhou said. “This suggests that appreciation pressure on the yuan will likely increase if the central bank does not actively intervene into the foreign exchange market.”
Spot rate strengthened
In the past week, the yuan’s spot rate strengthened to the strong side of the band for the first time since early March. Zhou said there was scope for the yuan to further appreciate, driven by conversion of onshore foreign exchange deposits and increased foreign portfolio inflows.
But the widening trade surplus may also hinder the chances of further policy easing in the third quarter, Nomura’s Chang said.
In May, the State Council, China’s cabinet, announced a number of accommodative measures to bolster trade. They included more credit, speedier export tax refunds and relaxed administrative procedures.
China’s economy delivered mixed performance. The official Purchasing Managers’ Index rose to 51.7 in July, the strongest in more than two years. But the service sector was lackluster, with the official non-manufacturing PMI plummeting to a low of 54.2.
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