China Aug Trade Slows as Exports Ease to Lowest Since February

     BEIJING (MNI) - Data released Friday by the General Administration of

Customs:

                   Balance (bln $)  Exports Y/Y %  Imports Y/Y %

----------------------------------------------------------------

August                       41.99            5.5           13.3

MNI Survey Median            48.50            6.8           10.0

Previous                     46.74            7.2           11.0

     FACTORS:

--China August Seasonally Adj. Exports -1.5% m/m VS -1.1% July

--China August Seasonally Adj. Imports -0.9% m/m VS -0.9% July

--China August Seasonally Adj. Exports +4.0% y/y VS +8.7% July

--China August Seasonally Adj. Imports +13.3% y/y VS +11.3% July

     TAKEAWAY: Chinese import and export indexes diverged in August as import

growth accelerated while exports slowed, indicating that domestic demand was

still robust, while the stronger yuan contributed to export weakness. The

performances of both were unexpected. 

     According to the General Administration of Customs, August export growth

softened to 5.5% year-on-year, slowing from the gains of 7.2% and 11.3% in July

and June, respectively, as the yuan continued its appreciation momentum. It was

the lowest since February, when exports decreased 1.3%.  

     Exports also came in below the MNI median forecast for a 6.8% rise.

     The stronger yuan exchange rate against the greenback in August contributed

to the slowdown of exports. The yuan appreciated 1.96% against the U.S dollar in

August, the largest monthly appreciation since July 2005.

     Export growth to the three biggest export destinations -- the United

States, European Union and Japan -- all slowed.  

     Exports to the U.S. rose 8.4% year-on-year to $39.21 billion, the lowest

monthly growth rate this year since January's 6.2% increase, excluding the 4.2%

drop in February. But it was significantly higher than the 0.2% decrease last

August. 

     Exports to the European Union grew 5.2% to $34.16 billion, the smallest

increase since April. Exports to Japan increased 1.1% to $11.16, the smallest

monthly gain this year.

     The overall export deceleration was in line with the official CFLP PMI new

export orders index, which fell to 50.4 last month from the previous 50.9 -- the

lowest reading since January, according to the National Bureau of Statistics. 

     Imports increased 13.3% year-on-year in August, higher than the MNI median

forecast for a 10.0% gain and also up from the 11.0% rise in July. 

     The acceleration in import growth was largely due to robust domestic demand

for raw materials and the rising prices of commodities. 

     Imports of iron ore increased month-on-month in August, with China

importing 88.66 million tons of iron ore, compared with 86.25 million tons in

July. Coal imports rose 29.8% m/m to 25.27 million tons. 

     The growth of imports was also in line with the latest official CFLP

manufacturing PMI index. According to the National Bureau of Statistics, the

import sub-index rose to 51.4 from the previous 51.1.  

     The import growth rate continued to outpace the export growth rate in

August, the 13th consecutive month it has done so, but absolute exports exceeded

imports, resulting in a $41.99 billion trade surplus. The surplus was lower that

the MNI survey median forecast of $48.5 billion, and was also lower than July's

$46.74 billion surplus.

     In the first eight months of this year, the trade surplus amounted to

$271.46 billion, below the $354.89 billion surplus in the same period last year,

with exports rising 7.6% y/y and imports up 16.9%.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

[TOPICS: MAQDA$,MAQDS$,M$A$$$,M$Q$$$,MI$$$$,MT$$$$]