China’s Export Shed 7.3%

Chinese exports fell in October for the seventh consecutive month as weak demand continued to weigh on the world’s second-largest economy, although the decline wasn’t as sharp as in September.

Exports dropped 7.3 per cent last month from a year earlier, the General Administration of Customs said Tuesday. The October export results, which followed September’s 10 per cent decline, were weaker than a median 5.7 per cent reduction forecast by 14 economists.

China’s trade picture has worsened in recent years on weaker demand from major markets in Europe, Asia and the United States. The downshift in China’s terms of trade reflects a broad slowdown in economic growth across both advanced and industrialized nations.

Imports last month benefited from increased demand for commodities driven by strong housing sales in top markets. Iron-ore prices rose 15 per cent month-on-month and crude-oil prices increased 1.5 per cent month-on-month on average in October. This dovetails with a gradual recovery in imports this year. During the first three quarters, imports declined 7.5 per cent compared with a 14.3 per cent decline during the same period of 2015.

But domestic demand remains weak. Vice Premier Wang Yang said last month at a government work conference in the southern manufacturing hub of Guangzhou that the outlook for a stable trade sector is still “not solid”, according to the official Xinhua News Agency. He urged Chinese companies to focus on building reputable brands and to move up the value chain.

China opted this year not to set a trade target -- a combined measure of imports and exports -- after missing by a wide margin its 6 per cent target for 2015 and its 7.5 per cent target for 2014. In the first 10 months of 2016, China’s combined imports and exports fell 7.6 per cent.

"External demand remains sluggish across the board," said Julia Wang, an economist at HSBC Holdings Plc in Hong Kong. "On the import side, commodities demand is still holding up well, suggesting that domestic infrastructure investment likely remains strong".

"Trade’s contribution to China’s economy is now diminishing as the economy increasingly depends on domestic demand," said Zhu Qibing, chief macro economy analyst at BOCI International (China) Ltd. in Beijing.

"These dynamics are much more about sluggish global demand and a terrible global trade environment than anything directly reflective of Chinese growth," said Andrew Polk, Beijing-based head of China research at Medley Global Advisors, which advises institutional clients. "Economic policy is almost entirely domestically focused right now, as it rightly should be."

"The mismatch between shrinking overseas sales, a weaker yuan, and resilient global demand is a puzzle, and might indicate deeper problems with the export sector," Fielding Chen and Tom Orlik, economists at Bloomberg Intelligence, wrote in a report. "The latest data will add to expectations for yuan weakness, though the pattern in the last few months has remained stability on a trade-weighted basis."

Consumer price and producer price inflation are due out Wednesday. Meanwhile, industrial output, investment and retail sales data will be released next Monday.