China Exports and Imports Fall Below Expectations in July

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

Customs:

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

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

July                         46.74            7.2           11.0

MNI Survey Median             46.4           10.8           17.5

Previous                     42.77           11.3           17.2

     FACTORS:

--China July Seasonally Adj. Exports -1.1% m/m VS +3.7% June

--China July Seasonally Adj. Imports -0.9% m/m VS -1.3% June

--China July Seasonally Adj. Exports +8.7% y/y VS +7.6% June

--CHINA July Seasonally Adj. Imports +11.3% y/y VS +11.8% June

     TAKEAWAY: Chinese import and export growth decelerated in July, indicating

worse-than-expected external and domestic demand. The decreases in both were

unexpected. 

     According to the General Administration of Customs, July export growth

softened to 7.2% year-on-year, the lowest this year since February, when it

decreased 1.3% due to  seasonal factors relating to Chinese New Year. It was

also below the MNI median forecast for a 10.8% rise and lower than the 11.3%

gain in June, due mainly to weaker overseas demand. 

     Export growth to both the United States and European Union slowed, while

exports to Japan accelerated in July.

     Exports to the U.S. rose 8.5% year-on-year to $37.34 billion, the lowest

growth rate since February, when they declined 4.2%. It was also significantly

lower than the 19.7% increase in June. Exports to the European Union grew 9.5%

to $32.84 billion, the smallest increase since April. 

     Exports to Japan increased 6.6% to $11.21, up from a 5.5% gain in June. 

     The stronger yuan exchange rate against the greenback in July also

contributed to the slowdown of exports. The yuan appreciated 0.75% against the

U.S dollar in July, higher than the 0.61% gain in June.  

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

export orders index, which fell 1.1 percentage points to 50.9 last month from

the previous 52.0, the biggest drop in the past five years, according to the

National Bureau of Statistics. 

     "The big support for exports ... in the first two quarters has started to

weaken in the third quarter, so there would not be a strong economic recovery"

this year, Deng Haiqing, chief economist at Jiuzhou Securities, told MNI. 

     Imports increased 11.0% year-on-year in July, lower than the MNI median

forecast for a 17.5% gain and also lower than the 17.2% rise in June. It was the

slowest growth rate since last December's 3.1% gain. 

     The slowdown in import growth was largely due to sluggish domestic demand

for raw materials. 

     Imports of iron ore declined month-on-month in July, with China importing

86.25 million tons of iron ore, compared with 94.70 million tons in June. Coal

imports fell 9.9% m/m to 19.46 million tons. 

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

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

import sub-index dropped to 51.1 from the previous 51.2.  

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

the 12th consecutive month it has done so, but absolute exports exceeded

imports, resulting in a $46.7 billion trade surplus. The surplus was higher that

the MNI survey median forecast of $46.4 billion, and also higher than June's

$42.77 billion surplus.

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

$231.68 billion, below the $307.54 billion surplus in the same period last year,

with exports rising 8.3% y/y and imports up 17.7%.

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

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

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