China’s imports extended the longest losing streak in six years, underscoring the headwinds to global growth from a rebalancing in the world’s second-largest economy. Asian shares, copper, the yuan and the Australian dollar weakened.
Imports plunged 17.7 per cent in yuan terms in September from a year earlier, widening from a 14.3 per cent decrease in August and an 11th straight decline. Exports fell 1.1 per cent in September in yuan terms, the customs administration said Tuesday, compared with a 6.1 per cent drop in August. The trade surplus was 376.2 billion yuan ($59.4 billion).
The import slide reflects this year’s plunge in commodity prices and tepid domestic demand as China shifts away from low-end manufacturing and debt-fueled investment. On the export side, a moderation in declines offers the first indication that the People’s Bank of China’s surprise devaluation of the yuan in August is giving a boost to competitiveness.
“No green shoots in this set of data,”
said Zhou Hao, a senior economist in Singapore at Commerzbank AG, Germany’s second-largest lender.
“The market was waiting for upside surprise in China as reflected in the commodity market. However, today’s data can’t support a long China view; therefore, I expect a market correction in the short term.”
Asian shares retreated from a seven-week high and the Australian dollar, seen as a proxy for China due to its commodity shipments, fell after the report. The yuan weakened.
In US dollar terms:
- Imports dropped 20.4 per cent from a year earlier versus economists estimates in a Bloomberg survey for a 16 per cent drop
- Exports slipped 3.7 per cent, versus estimate for a 6 per cent slide
- Trade surplus was $60.34 billion, near record level
“Import growth remained sluggish, suggesting weakening domestic demand, particularly investment demand,”
said Yang Zhao, China economist at Nomura Holdings Inc. in Hong Kong.
“We maintain our view that GDP growth will decline to 6.7 per cent in the third quarter.”
Zhao expects more fiscal stimulus and for monetary policy to remain accommodative.
China’s policymakers have increased infrastructure investment and loosened monetary settings in a bid to cushion the slowdown. The latest steps include new approvals to build rail networks, the expansion of a plan allowing lenders to borrow from the PBOC using loans as collateral, a tax cut for vehicle purchases and a reduction in the minimum down payment for first-time home buyers.
Exports, while still declining, fared better than in August, underpinned by US demand.
“Chinese exporters proved to be competitive despite global turmoil and a strong RMB,”
said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, referring to the abbreviated name of the renminbi.
“The Chinese government is going to stimulate domestic demand through more easing in monetary policy,”
and fiscal policy that’s focused on local government infrastructure projects, he said.
A slowdown in emerging markets driven by weak commodity prices forced the International Monetary Fund this month to cut its outlook for global growth this year to 3.1 per cent from a July forecast of 3.3 per cent. Next year, the world economy will expand 3.6 per cent, less than the 3.8 per cent projected in July.
The fund left its outlook for China’s growth this year at 6.8 per cent and 6.3 per cent for next year. Still, the IMF said the “cross-border repercussions” of slowing Chinese growth “appear greater than previously envisaged.”
Reflecting the global fallout, German exports slumped the most since the height of the 2009 recession in August. China is the nation’s third-largest trade partner.
“We anticipate further headwinds in the coming months,”
said Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong.
“Our model suggests that global industrial production will lose further momentum. Not only China but emerging market countries are also struggling with domestic demand.
Now leading indicators from Germany and US are also pointing to a growth slowdown.”