The report on China’s trade data on exports dropped more than what was expected in September, stressing the dogged weakness in global demand that is currently weighing on the world’s second biggest economy.
The disappointing export data caused fear among investors that China’s recovery in its economy may as well be faltering. Imports also unexpectedly declined after picking up in August, further suggesting signs of steadying in in China’s economy may be short-lived.
On Thursday, the General Administration of Customs cited that September’s 10% year-over-year plunge marks the sixth straight monthly decline as global demand for Asian goods remains obstinately anemic despite heading into the peak year-end shopping season.
The 10% dive follows a 2.8% loss previously in August. The decline was also distinctly worse than the forecasted of 3.3% drop from a group of economists’ poll. Weaker demand for Chinese goods was grasped in almost all of its major markets in the US, Europe and bulk of Asia.
Meanwhile, import data recorded a fall of 1.9% in September from a year earlier, withdrawing the 1.5% increase in August. These numbers were weaker than forecasted. Economists claimed September’s import decline echoed ongoing weakness in the domestic economy, with lower import volumes for commodities such as copper and iron ore. This could be taken as an early sign that the recent recovery in economic activity is already losing momentum.
The reduction in imports and exports resulted in China’s trade surplus constricting to a less than expected $41.99 billion in September, from the preceding month’s amount of $52.05 billion. Overall, the data disappointed markets and highlighted that the fundamentals of China’s economy remain weak.
The poor trade numbers indicated a weaker demand both at home and aboard, and worsened fears over the latest decrease in the yuan, which touched a fresh six-year low against a stronger US dollar on Thursday.
Luis Kujis, head of Asia economics at Oxford Economics, stated that China’s trade data report “comes on the heels of weak South Korean trade data, and it definitely makes us worry about to what extent global demand is improving.” South Korea’s Samsung Electronics have been experiencing difficulties on increasing complaints about its Galaxy Note 7. The smartphone maker has announced to discontinue the production and sales of the controversial handset on its official website.
This event affects China as BBVA Research economist Xia Le describes the nation as “a very important part of this [Samsung] supply chain.”
China, Global Economy
Following Beijing’s order to pursue an accommodative monetary policy and accelerate infrastructure spending, growth was seen to stabilize in recent times. However, this recovery only acted as a cover for deeper and bigger problems China is facing right now, such as frail private investment, increasing corporate debt and prevalent industrial overcapacity.
Economists have cited that lackluster global demand was the chief reason for September’s weaker performance. Trade was lower with all of China’s key trading partners in the prior month. The World Trade Organization forecasts global trade to rise by a slack 2.8% in 2016, the fifth consecutive year below 3%.
Previously one of the largest contributors of the country’s growth, China’s overseas shipments have fallen in 14 out of 15 months. This is a huge burden as it will certainly drag the broader economy of the country. Some economists said they predicted Beijing to further denigrate the yuan in upcoming months to make exports more affordable. The yuan has degraded roughly 3% against the greenback and 6% against a broader basket of currencies so far in the year.
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