China's trade slump narrows as stabilization signs emerge
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[September 07, 2023] By
Joe Cash
BEIJING (Reuters) -China's exports and imports extended declines in
August as the twin pressures of sagging overseas demand and weak
consumer spending at home squeezed businesses in the world's
second-largest economy, although the falls were slower than expected.
While the trade numbers follow a run of other indicators showing a
possible stabilization in China's downturn, they remain far short of the
growth economists anticipated earlier this year when the government
abandoned its strict COVID curbs.
Exports dropped 8.8% in August year-on-year, customs data showed on
Thursday, beating a forecast of 9.2% in a Reuters poll and off a 14.5%
drop in July. Meanwhile, imports contracted 7.3%, slower than an
expected 9.0% decline and last month's 12.4% fall.
China's economy is at risk of missing Beijing's annual growth target of
about 5% as officials wrestle with a worsening property slump, weak
consumer spending and tumbling credit growth, leading analysts to
downgrade forecasts for the year.
"The trade data is marginally better, but I don't think we should be
reading too much into that: trade is still contracting," said Frederic
Neumann, chief Asia economist at HSBC.
"There is a bit of a sign here of stabilization, but I think there's
still a long way to go," he added.
Beijing has announced a series of measures in recent months to shore up
growth, with the easing of some borrowing rules last week by the central
bank and the top financial regulator to aid homebuyers.
But analysts warn the steps may have little impact with a labor market
recovery slowing and household income expectations uncertain.
"The figures suggest the headwinds remain, despite some marginal
improvement," said Zhou Hao, chief economist at Guotai Junan
International. "Looking ahead, whether China's trade growth has already
hit the bottom will hinge on several factors, the most important of
which is obviously domestic demand."
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Containers are seen at the Yangshan Deep-Water Port in Shanghai,
China October 19, 2020. REUTERS/Aly Song/File Photo
Governments around the world are nervous about China's economic
slowdown with many exporting nations highly dependent on the
country's market for growth.
South Korean shipments to China, a leading indicator of the latter's
imports, dropped just a fifth last month, slowing from a decrease of
27.5% a month earlier, offering another nod to conditions
stabilizing in China.
Declines in trade with the United States, Southeast Asia and
Australia also narrowed.
However, trade with Japan dropped sharply, with outbound shipments
from China to its neighbor down 20% in August year-on-year, while
imports worsened by 17%.
Policymakers in Tokyo fear China's deepening economic woes could hit
Japan's fragile recovery, especially if Beijing fails to shore up
demand with meaningful stimulus.
Crude oil shipments to China were 31% higher in August than the same
period last year, and up 21% on July, while soybean imports in
August also jumped 31% from a year ago, encouraged by cheap prices
in Brazil.
While some analysts some saw signs of stabilization in the data,
investors were not so impressed with the yuan wallowing near a
10-month low and the Australian dollar, seen as a proxy for Chinese
growth, turning weaker after the data.
China posted a trade surplus of $68.36 billion in August, compared
with a forecast $73.80 billion and a July figure of $80.6 billion.
"Due to the low base at the end of last year, it's very likely for
exports to return to growth at the end of this year," said Nie Wen,
an economist at Hwabao Trust.
(Reporting by Joe Cash, Ellen Zhang, Liangping Gao and Beijing
Newsroom; Editing by Sam Holmes)
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