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November 9, 2016

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Trade figures fail to meet expectations

CHINA’S exports and imports fell more than expected in October, as weak domestic and global demand dealt a blow to the world’s No. 2 economy following recent signs of stability.

Exports last month fell 7.3 percent from a year earlier, while imports were down 1.4 percent, official figures released yesterday showed.

The nation’s trading value totaled 2 trillion yuan (US$295 billion) last month, losing 1.9 percent from a year ago, according to data from the General Administration of Customs.

Yuan-denominated exports shrank 3.2 percent from a year ago to 1.19 trillion yuan, albeit narrowing the drop in September at 5.6 percent annually. Imports gained 3.2 percent year on year to 860.6 billion yuan, picking up steam from September at 2.2 percent annually.

Despite the slight rebound from September, “the outlook remains dim, especially as the external demand is weak amongst the ongoing global economic downturn,” China Merchants Securities said in a report.

Although domestic demand was bolstered by profit recovery among A-share listed companies, which from July to September posted 0.6 percent growth from a year ago, external demand kept losing as new export orders fell and business confidence softened in October.

Meanwhile, the decoupling of foreign exchange reserves from the trade surplus caught the attention of analysts.

The trade surplus was 325.2 billion yuan in October, 17 percent up from 278.4 billion yuan in September. However, the country’s foreign exchange reserves lost US$45.7 billion in October from September — shrinking for the fourth consecutive month — to US$3.1 trillion.

“It came in tandem with the depreciation of yuan,” said analyst Luo Kangjie at Saxo Bank, a foreign exchange bank.

Last month, the yuan weakened 1.53 percent against the US dollar, while yesterday the loss had extended by 0.14 percent since November 1.

While recent data suggested the economy was steadying, analysts have warned that a property boom which has generated a significant share of the growth may be peaking, dampening demand for building materials from cement to steel.

Analysts polled by Reuters had expected October exports to have fallen 6 percent from a year earlier, compared to a 10 percent contraction in September. Imports had been expected to drop 1 percent, after falling 1.9 percent in September.

“Our conclusion is that external demand remains sluggish but it has not worsened significantly. Although both exports and imports have fallen short of expectations, they have improved on a year-on-year basis,” economists at ANZ said in a note.

Still, China’s exports in the first 10 months of the year fell 7.7 percent from the same period a year earlier, while imports dropped 7.5 percent.

Exports have dragged on economic growth this year as global demand remains stubbornly sluggish, forcing policy-makers to rely on higher government spending and record bank lending to boost activity.

Weak exports knocked 7.8 percent off the country’s GDP growth in the first three quarters of the year. Imports fell for the second month in a row in October after rising for the first time in nearly two years in August.

Exports to the US fell 5.6 percent in October, compared to an 8.1 percent decline in September, while shipments to the EU fell 8.7 percent, a slight improvement from the previous month.

China’s imports from Southeast Asia rose 18.4 percent in October, while those from Australia increased 16.3 percent, both significant improvements from recent months.


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