Chinese exports shrink less than expected, imports dip raises stimulus hope

Trade data from China painted a mixed picture, with exports shrinking for the second month but not by as much as feared.

The country's exports declined by 5.5% in dollar terms compared to the same month last year, better than consensus for a 6.6% fall and further decelerating following a decrease of 8.3% in July.

Imports from abroad were much weaker, with purchases decreasing at a significant 13.8% year-on-year rate in dollar terms, far exceeding the 7.9% consensus and the fall of 8.1% in July, casting some further doubt on domestic demand.

This left the trade balance surging to a $60.24bn surplus, larger than the $48bn estimated and the previous $43.0bn.

In local currency terms, exports were down 6.1% versus the 8.9% previously, while imports shrank 14.3% compared to 8.6% a month before, leaving the trade balance at 368bn yuan.

"We think the apparent weakness is misleading," analysts at Capital Economics said in a research note e-mailed to clients.
They referenced negative 'base effects' when comparing with last year's figures to back up their case.

Given the seasonal adjustment the figures looked "less alarming" and were still consistent with a partial recovery in both exports and imports since the start of the year, they said.

Craig Erlam, senior market analyst at Oanda, was one of the voices of doom: "Chinese trade data added to the doom and gloom surrounding the world’s second largest economy over night. While the overall trade surplus was just shy of its record, the underlying figures were very disappointing and pointed to slowing demand, both domestically and from abroad."

Michael van Dulken at Accendo said the data provided a "mixed picture" about China's economic growth, with exports not as weak as expected "reviving global growth recovery hopes", but much weaker imports "adding to worries about domestic growth".

"More to worry about," he wondered, "or simply a timing issue impacted by tough comparables last year and this August impacted by the Tianjin explosion and Victory day holiday?"

The trade data followed foreign reserves data released by the People's Bank of China yesterday, with a largest fall on record in dollar reserves.