China’s Exports Fall

oilmeals-exports-fall-by-42-in-augustThe sluggish Chinese trade data in May 2016 provided the latest indicator that the second biggest global economy was still far from robust health.

Exports measured in terms of dollar crashed 4.1 percent on-year, in excess of 1.8% fall in April and marginally worse than assessments for a 3.6 percent decline.

On the other hand, imports ended 0.4 percent down on-year, narrower than the 10.9% drop in April and the 6 percent fall expected.

This resulted in Beijing have a trade surplus of $49.98 billion, broader than $45.56 billion in April.

The yearly exports were 7.3% lower, while imports were 10.3% lower during the five months of 2016.

Market response was comparatively subdued. Softening demand globally was the main reason for weak exports and not internal factors. Experts pointed to poor demand in several of China’s vital trading partners, including the EU, Japan, and the US.

The export growth in China is expected to be subdued in the short-term. The global economy is estimated to neither slow down nor pick-up.

Analysts referred the better-than-expected imports data to the continuing improvement in international commodity prices that increased import values. Import growth is likely to move upward throughout the year.

According to Thierry Apoteker, executive chairman and chief economist at TAC Economics, “China has been losing worldwide market share on manufactured products for a while… if worldwide trade in dollar terms is zero, China is at minus 4. This is no surprise because most competitors have had their currency depreciating by 20-25 percent since 2013, but the yuan has remained broadly stable, with depreciation only beginning since July 2015.”

Certain banks like Oversea-Chinese Banking Corporation (OCBC) are forecasting a still weaker currency due to an impending U.S. interest rate hike, and not because of policymaking within China.

The overall currency management strategy in China has been criticized for being the weak link. Activity in China’s manufacturing and services sectors was comparatively unchanged.

Indeed, anxiety regarding the direction of the Renminbi (the currency of China) has been the cause of unstable investor sentiment.

Traders and financial stakeholders have often accused China of devaluing its currency to increase its exports. However, the Chinese central bank has denied the rumours as it tries to make the currency become more market-oriented.

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