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October 14, 2016

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Trade weakens after exports take a tumble

CHINA’S trade was much weaker than expected in September mainly due to a sudden turnaround in exports, dampening hopes of further economic stabilization in the world’s second-largest economy.

Exports lost 5.6 percent from a year earlier to 1.22 trillion yuan (US$182.9 billion) last month, reversing August’s 5.9 percent increase. Imports rose 2.2 percent to 945 billion yuan, compared to the jump of 10.8 percent a month earlier, said the General Administration of Customs.

The nation’s trade surplus was 278 billion yuan in September, narrowing from 346 billion yuan in August and down 25 percent from the same period of last year.

“The sharp downturn of exports was broad-based,” said David Qu, an economist at Australia & New Zealand Banking Group Ltd. “Sluggish external demand will continue to weigh on the trade outlook.”

The worsening situation was compounded by the yuan’s deprecation by 4.7 percent to 6.67 against the US dollar in the past 12 months. In US dollar terms, exports dropped 10 percent in September.

“Against the backdrop of an ongoing capital account deficit, the trade surplus has been an important factor in offsetting capital outflows,” Qu said. “But the contraction in exports may continue to see the trade surplus narrow.”

Li Wei, an economist with Commonwealth Bank of Australia, was more optimistic. “Trade surplus has peaked as a share of GDP,” Li said, noting that China’s annual goods trade surplus to GDP ratio had fallen from 5.7 percent at the end of the second quarter to 5.4 percent at the end of the third quarter.

In the first three quarters, China’s trade lost 1.9 percent to settle at 17.5 trillion yuan, with exports contracting 1.6 percent and imports down 2.3 percent.

China’s gross domestic product expanded 6.7 percent in the first half, largely in line with the government’s target of 6.5-7 percent growth.

Earlier this week, Premier Li Keqiang said the economy had performed better than expected in the third quarter and showed many positive changes, especially in areas such as supporting innovation-led growth and dealing with overcapacity.

The China Wealth Index, compiled every two months by Bank of Communications and Nielsen to gauge sentiment among Chinese households, stood at 135 in September, the first retreat so far this year. It was 137 in July.

The component index measuring people’s confidence in the broad economy lost 1 point to 128, or the first retreat in a year.3

Readings above 100 reflect optimism.

“Poor performance in the stock market and the crazy rise of housing prices were blamed for the loss in optimism,” said Lian Ping, chief economist at Bank of Communications.

But Lian said with the recent policies curbing speculation in the property market and others to support the economy, households may regain confidence.


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