A weaker yuan exchange rate against the US dollar is not helping China’s export machine – at least not during the past two months.
Although the yuan lost about 1.5 per cent against the greenback in October, shipments of Chinese products to overseas markets dropped 7.3 per cent in dollar terms last month compared with a year earlier, following a fall of 10 per cent in September, according to data released by China’s General Administration of Customs on Tuesday.
Exports to China’s top three destinations, namely the United States, the European Union and Japan, in October dropped 5.6 per cent, 8.7 per cent and 3.3 per cent, respectively, compared with the year before.
But exports to the Association of Southeast Asian Nations declined only 0.9 per cent – much less than the 10.8 per cent reduction recorded in September.
“Goods exports improved somewhat in October after the major setback in September, but not enough to prevent a further loss of momentum and underscoring that the recent trend towards somewhat stronger global demand growth remains fragile and susceptible to setbacks,” Louis Kuijs, head of Asia research at Oxford Economics, wrote in a note.
“Imports continued to do better than exports, signalling that domestic demand held up well through October, although we expect downward pressures on domestic demand to remain going forward.”
China Merchants Securities macro analyst Liu Yaxin said: “The two-straight monthly falls of exports reinforced the impression that foreign demand may be actually worse than expected.”
China’s imports dropped 1.4 per cent in October in dollar terms, but rose 3.2 per cent in yuan terms.
“The ongoing cyclical rebound in China’s economy should support imports for another quarter or two, but is unlikely to last much longer given that the boost to growth from earlier policy easing is set to fade before long,” the research consultancy Capital Economics wrote.
The official purchasing manager’s index (PMI) hit a 26-month high of 51.2 last month.
January-October exports fell 7.7 per cent year-on-year to US$1.71 trillion, while imports were down 7.5 per cent to US$1.27 trillion.
Trade surplus widened to US$49.1 billion last month from US$15.2 billion a month earlier, leaving the country with a US$441.6 billion trade surplus in the first 10 months of the year.
The fourth quarter is usually a high export season given the Christmas and New Year orders, but the high comparison base last year weighed heavily on trade figures, the Ministry of Commerce said in a report released last week.
The trade results are part of China’s struggle to stabilise its economy.
Gross domestic product growth has been maintained at 6.7 per cent so far this year. China is due to release monthly investment and consumption data next Monday.