CHINA EXPORT DECLINE CONTINUES

China’s Export Decline Accelerates

June exports were down 4.8% in dollar terms from a year earlier, after drops of 4.1% in May and 1.8% in April

ENLARGE

The Chinese port of Lianyungang last month; in dollar terms, Chinese exports and imports were both down in June from a year earlier. Photo: Zuma Press

July 13, 2016 7:19 a.m. ET

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BEIJING—China’s export performance is likely to keep worsening, economists said—but they don’t foresee Beijing resorting to competitive devaluation to improve it.
June exports were down 4.8% in dollar terms from a year earlier, the customs administration said Wednesday, accelerating from drops of 4.1% in May and 1.8% in April.
Imports also weakened, the agency reported, falling 8.4%, compared with a 0.4% drop in May, as China’s appetite for goods from its Pacific neighbors shrank.

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The trade surplus narrowed to $48.11 billion from $49.98 billion.
Economists said the worsening trade data came as no surprise, given weak demand and increasing financial-market turbulence world-wide.

“The outlook for China’s exports in coming months is not positive given the sluggish global demand and the U.K.’s decision to leave the European Union that may affect British and European economic growth,” said Zhang Fan, an economist with RHB Research. The uncertainty left by the U.K. referendum is likely to weigh on demand in the EU, which takes in about 16% of China’s total exports, said Raymond Yeung and Louis Lam, economists with ANZ Research, in a note.
For the first six months of 2016, China’s trade with the Association of Southeast Asian Nations, the EU and the U.S. was off 8.1%, 4% and 10.9% respectively from a year earlier, according to the customs agency.
Huang Songping, a customs spokesman, said tepid external demand and intensifying downward pressure on domestic growth continue to weigh on China’s exports. The weak trade numbers dovetail with other data that signal continuing challenges for China’s economy. In June, both official and private gauges of manufacturing activity weakened—a reflection of overcapacity, slower growth and rising debt.
Chinese Premier Li Keqiang told a meeting of business executives and government representatives on the sidelines of an EU-China summit Wednesday that China’s economy met expectationsin the second quarter. Growth, to be announced Friday, will likely come in close to the first quarter’s 6.7% rate, he said. A Wall Street Journal poll of 16 economists pointed to 6.6%.
Weakening domestic demand—as slower manufacturing and private investment slow—contributed to the weakening in imports, but so did lower commodity prices, said Bank of Communication economist Liu Tao, who expects imports to continue to drop in the second half. Trade, once an important growth engine, is unlikely to make any more contribution to the world’s second-largest economy, he said. Instead, China may have to rely more on investment and consumption.
ANZ Research noted that exports in dollar terms were weaker in part because of a drop in the value of the yuan, down 8% in June from a year earlier. They said they expect the latest trade data to have little impact on the People’s Bank of China’s exchange-rate policy.
Authorities are more willing to allow the yuan to “dictate by market force,” ANZ economists said. “We do not expect China to boost exports through competitive devaluation.”
Commerzbank AG CRZBY 2.76 % ’s Mr. Zhou said in recent weeks it appeared that the central bank has stepped into the foreign-exchange market to boost the yuan.
“The Chinese authorities have to acknowledge that the exports can’t get improved without a solid external demand, and the risk of capital flight is rising if the one-way depreciation continues,” he said.

—Pei Li, Grace Zhu and Liyan Qi