Weaker China trade heightens fears of falling global demand

Shipping volumes at Shanghai's Yangshan port (right) and other trading hubs in China could slow further as demand for Chinese goods overseas continues to weaken. Exports for last month shrank by 10 per cent - far more than the 3 per cent expected - e
Shipping volumes at Shanghai's Yangshan port (right) and other trading hubs in China could slow further as demand for Chinese goods overseas continues to weaken. Exports for last month shrank by 10 per cent - far more than the 3 per cent expected - even with the year-end shopping season looming.PHOTO: REUTERS

BEIJING • Exports for last month fell 10 per cent from a year earlier, more than expected, while imports shrank unexpectedly after having picked up in August, suggesting signs of steadying in China's economy might be short-lived.

The disappointing trade figures point to weaker demand at home and abroad, and deepened concerns over the latest depreciation in the yuan, which hit a fresh six-year low against a firming greenback yesterday.

"This comes on the heels of weak South Korean trade data and definitely makes us worry over how far global demand is improving," said Asia economics head Luis Kujis at Oxford Economics in Hong Kong.

Asian stocks hit three-week lows, and United States stock futures and treasury yields fell after the data.

China's exports had been expected to shrink by 3 per cent, slightly more than in August. Global demand for Asian goods remains weak even with the year-end shopping season approaching. Demand for Chinese goods weakened in nearly all of their major markets in the US, Europe and much of Asia.

Imports shrank 1.9 per cent, dashing hopes of a second rise in a row. August saw an increase of 1.5 per cent, the first expansion in nearly two years, thanks to stronger demand for coal and commodities such as iron ore.

That left China with a trade surplus of US$41.99 billion (S$58.2 billion) for last month, the lowest in six months, the General Administration of Customs said yesterday. Analysts had expected US$53 billion.

The weaker figures could raise concerns in the coming week about other data for the month and the third quarter. Economists had expected this data to show that the economy was stabilising and perhaps even picking up slowly.

The import reversal raises questions over the strength of the recent recovery in domestic demand, economist Julian Evans-Pritchard at Capital Economics said in a note. "The continued underwhelming performance of Chinese exports adds weight to our view that the People's Bank will maintain its recent policy of gradual trade-weighted (yuan) depreciation in coming quarters."

China's economy had shown signs of steadying, thanks largely to a building boom, but some analysts warn that the housing frenzy could be peaking as more cities impose restrictions on home buying to keep prices from overheating.

Data has also highlighted growing imbalances in the economy, with growth relying increasingly on government spending as private investment falls to record lows.

Last month, the World Trade Organisation cut its forecast for global trade growth this year to 1.7 per cent, reflecting a slowdown in China and falling levels of imports into the US.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 14, 2016, with the headline 'Weaker China trade heightens fears of falling global demand'. Print Edition | Subscribe