China's export growth continues to slow
Updated: 2011-08-04 07:06
By Peter Pak(HK Edition)
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Seasoned readers may have noticed that we have constantly been tracking China's trade statistics.
I believe there are two issues of major importance in this. Firstly, net exports or a trade surplus has been one of the key drivers for China's economic growth over the years.
Secondly, China has emerged into a "world factory" and its trade figures have become an indicator of global demand and thus the market watches it closely.
Let's have a quick look then at the recently released data from the State Administration of Customs (SAC).
According to SAC, China's exports grew 17.9 percent YoY (all figures on a year-on-year basis unless otherwise specified) in June after rising 19.4 percent in May and 29.9 percent in April. Imports rose 19.3 percent, down from 28.4 percent in the previous month. Meanwhile, the trade surplus rebounded to $22.7 billion from $13 billion in May and $11.4 billion in April. For the first half of 2011, exports and imports increased 24 percent and 27.6 percent, compared with corresponding increases of 25.5 percent and 29.4 percent in the first five months of 2011 through end-May.
Overall, exports and imports have maintained their relatively high growth in recent months although their growth rates have both declined somewhat amid the rising comparative base.
In June, China's exports to most economies saw a significant slowdown while those to Japan rebounded somewhat. Exports to the European Union (EU) grew 17.2 percent and those to the US rose 16.1 percent in June, down from the increases of 31.3 percent and 26.2 percent in May. Growth of exports to Japan rebounded from 12.4 percent in May to 28.4 percent in June, probably reflecting reconstruction effect after the earthquake there in March. Meanwhile, exports to the Association of Southeast Asian Nations (ASEAN), Hong Kong and South Korea rose 16.3 percent, 35.2 percent and 13.9 percent, versus increases of 29.1 percent, 31.7 percent and 27.8 percent in May. Export growth to Australia and Russia also saw deceleration from the rises of 40.4 percent and 103.8 percent in May to 30.2 percent and 60.4 percent in June.
Meanwhile, exports of many labor-intensive goods and machinery products showed steady growth while some intermediate capital goods saw consecutive mitigations. Exports of garments and clothing jumped 25.6 percent and those of footwear rose 21.5 percent in June after rising 23.8 percent and 17.7 percent in May. Meanwhile, exports of textiles and related articles grew 17.9 percent after climbing 23.7 percent, while the growth of exports in toys accelerated from 0.8 percent in May to 5.3 percent in June. Exports of mechanical and electrical (M&E) products and high-tech products grew 13.7 percent and 11.8 percent in June, versus rises of 14 percent and 8.5 percent in May. In June, the export of steel products turned to a decline of 1.7 percent from an increase of 25.7 percent in May, and those of automatic data processing machines & units continued to post low growth of 3.3 percent in June after climbing 2.8 percent in the previous month.
On the other hand, imports of most commodities showed some mitigation amid the correction in commodity prices and the slowdown in the Chinese economy during the month. The import volume of iron ore increased 8.3 percent after the price rose 20 percent in June, compared to the increases of 8.1 percent and 47.6 percent in the first five months of the year to May 31. Meanwhile, the soybean import volume declined 30.6 percent in June after dropping 1 percent in the first five months, while the import value declined 6.9 percent compared to the increase of 29 percent in the first five months. As for crude oil, the import volume rose 11.3 percent, while its price increased 43.3 percent. Probably due to the domestic tightening policies, the growth of M&E product and high-tech product imports slowed from 20.6 percent and 17.3 percent in the first five months to 11.5 percent and 9.9 percent, respectively, in June.
We expect export growth to register relatively strong growth ahead, supported by the continued recovery of the global economy this year. Due to the base effect as well as the continually rising input costs, however, export growth is likely to slow to below 20 percent in the second half of this year. As for imports, domestic industry upgrades and inflationary pressure may boost imports while the tightening policies are expected to have some negative effect. We project import growth to exceed export growth while the trade surplus is expected to decline from $184.5 billion in 2010 to around $130 billion this year.
The author is executive director of BOCI Research Limited. The opinions expressed here are entirely his own.
(HK Edition 08/04/2011 page2)