China’s exports fell for a seventh month, leaving policy makers reliant on domestic growth engines to hit their economic expansion goals. Key Points
  • Overseas shipments dropped 7.3 percent from a year earlier in October in dollar terms
  • Imports slipped 1.4 percent
  • Trade surplus widened to $49.1 billion
Big Picture A depreciation of about 9 percent in the yuan since August 2015 has cushioned the blow from tepid global demand, but failed to give shipments a sustained boost. Rising input costs and surging wages have flattened exporter profit margins to the point where many can no longer discount and may raise prices, according to interviews at the Canton Fair last month. With global demand tepid, policy makers are relying on infrastructure investment and a property led pick up in local demand to reach their expansion goal of at least 6.5 percent this year. Economist Takeaways “External demand remains sluggish across the board,” said Julia Wang, an economist at HSBC Holdings Plc in Hong Kong. “On the import side, commodities demand is still holding up well, suggesting that domestic infrastructure investment likely remains strong.” “Trade’s contribution to China’s economy is now diminishing as the economy increasingly depends on domestic demand,” said Zhu Qibing, chief macro economy analyst at BOCI International (China) Ltd. in Beijing. “With both global and domestic growth unlikely to accelerate much further, the medium-term outlook for Chinese trade remains challenging,” said Julian Evans-Pritchard, an economist at Capital Economics in Singapore. “The ongoing cyclical rebound in China’s economy should support imports for another quarter or two but is unlikely to last.” “The mismatch between shrinking overseas sales, a weaker yuan, and resilient global demand is a puzzle, and might indicate deeper problems with the export sector,” Fielding Chen and Tom Orlik, economists at Bloomberg Intelligence, wrote in a report. “The latest data will add to expectations for yuan weakness, though the pattern in the last few months has remained stability on a trade-weighted basis.” The Details
  • Exports to U.S. slipped 5.6 percent in October and fell 8.7 percent to EU.
  • Imports from U.S. fell 6.9 percent
  • Exports slipped less when measured in yuan as depreciation cushioned impact of tepid global demand
  • Crude imports fell from a record
  • Coal imports decreased for a second month
  • Copper imports drop to lowest since February 2015 as domestic output climbed