September exports in China fell 10 percent from the same period last year, a far more significant decline than originally expected. Similarly, imports shrank a little after a slight boost in August; overall this suggests that the steady China we once knew may be teetering (like the rest of us).
These disappointing trade figures in the world’s second largest economy point to weaker national and international demand, which continues to grow concerns over China’s most recent yuan depreciation, which is now at a six-year low against the firming dollar, Thursday.
“This comes on the heels of weak South Korean trade data, and it definitely make us worry about to what extent global demand is improving,” explains Luis Kujis, who is head of Asia economics at Oxford Economics, in Hong Kong.
Looking more closely, Asian stocks have fallen to a three-week which has also caused U.S. stock futures and Treasury yields to fall; and copper prices slipped in London, too.
Now, China’s export number had been expected to fall by 3 percent, which is slightly worse than the numbers in August, but most would have also expected China to recover. Unfortunately, global demand for Asian goods continues to drag even as we approach the North American holiday season—typically peak shopping months for China.
Indeed, falling demand for Chinese goods overall has been seen just about every major market across not only the United States and Europe, but even in Asia as well.
In August, China’s imports unexpectedly grew 1.5 percent, posting the country’s first expansion in almost two whole years, boosted by strong coal and commodities (like iron ore, which is important to the construction industry, of course). Unfortunately, China’s imports shrank again last month by 1.9 percent, crushing all hopes for two months in a row of increases.
This has left China with a nearly $42 billion trade surplus, which is its lowest in six months. That might sound like a lot, but analysts had originally expected the country would expand these numbers to $53 billion.
Indeed, Julian Evans-Pritchard, of Capital Economics, comments that this import reversal does introduce a few serious questions about the strength of domestic demand and recovery.
He says, “This could be an early sign that the recent recovery in economic activity is losing momentum, although we would caution against reading too much into a single data point given the volatility of the trade figures. The continued underwhelming performance of Chinese exports adds weight to our view that the People’s Bank will maintain its recent policy of gradual trade-weighted renminbi (yuan) depreciation in coming quarters.”