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 The data will add to the pressure on Beijing policymakers trying to
ensure China's economy avoids a hard landing, though authorities
will take some comfort that their efforts to steady the country's
stock markets were rewarded with a late rally on Tuesday.
Imports dived 13.8 percent from a year earlier, far more than
analysts had forecast, and a tenth consecutive monthly drop,
reflecting both lower global commodity prices and sluggish demand.
A surprise devaluation in the yuan <CNY=CFXS> early last month
combined with slowing consumer demand will dent the prospects of
imports picking up significantly anytime soon.
Much of China's imports are commodities and other raw materials
going into factories that turn them into goods for sale overseas, so
the fall could be an ominous sign for exports in the coming months.
Exports fell less than forecast, sliding 5.5 percent, but analysts
were still doubtful that China can now achieve its year-end trade
growth target of 6 percent.
"The yuan devaluation will have limited impact on exports, which are
falling because demand is weak, not because the price is not good,"
said Li Jian, head of foreign trade research at the Chinese Academy
of International Trade and Economic Cooperation, the Commerce
Ministry's think-tank.
China's foreign exchange reserves posted their biggest ever monthly
fall in August, reflecting Beijing's efforts to stabilize the yuan
following its devaluation.
STOCKS VOLUMES TUMBLE
Chinese policymakers have been trying to reassure financial markets
that their currency is stable and that the recent stock market
turbulence is easing.
Stocks have fallen around 40 percent since mid-June, with the
Shanghai Composite Index hovering around the 3,000 point level,
having been above 5,000 less than three months ago.
Shares initially declined on Tuesday but rallied later in the day to
finish almost 3 percent higher - though trading volumes in both
stocks and futures were down sharply.
The CSI300 index of the biggest stocks listed in Shanghai and
Shenzhen closed up 2.57 percent, while Shanghai was up 2.93 percent.
Volume in the Shanghai market was the lowest since February, a month
when trading is usually thin due to the Chinese New Year Festival.
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The stock futures market was hit by an abrupt reversal in policy
that caused trading volumes to collapse. Last Wednesday, China
raised the margin requirements for futures not being used for
hedging purposes to 40 percent of the contract's value from 30
percent.
The futures contract for the CSI300 index maturing in September has
seen volumes dive, logging 28,957 transactions on Tuesday, down
almost 100 percent from a week ago. On Aug. 25, when markets were in
a major sell-off, the contract saw 2.43 million transactions.
Chinese authorities have rolled out a series of measures to bring a
sense of calm back to their stock markets and reduce short-term
speculation.
On Monday, the finance ministry dangled incentives to encourage
longer-term investments, saying it would remove personal income tax
on dividends from shares held for more than a year, and halve it on
those held for between a month and a year.
That announcement came hours after regulators and exchanges proposed
introducing a 'circuit breaker' on the CSI300 index to help steady
the market.
Analysts said these measures are unlikely to encourage many
investors to come back into the market for stocks in either mainland
China, known as A-shares, or Hong Kong, given the longer-term
economic concerns hanging over the market.
"While investors see value in Hong Kong-listed Chinese equities,
they're concerned about an inevitable U.S. Federal Reserve rate hike
and Beijing's ability to manage A-shares, growth, capital flight and
its currency," analysts at Nomura wrote in a client note.
(Additional reporting by Winni Zhou and Henning Gloystein in
Singapore; Writing by Rachel Armstrong; Editing by Ian Geoghegan)
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