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China trade performance weakens again as surplus shrinks

ABC NEWS logo ABC NEWS 8/12/2015
While China's surplus narrowed, it still remains a substantial 343 billion Yuan or $US53 billion. © ABC News While China's surplus narrowed, it still remains a substantial 343 billion Yuan or $US53 billion.

The value of China's imports and exports has fallen again, showing the impact of tumbling commodity prices and a weakening domestic economy.

In local currency terms, the value of imports fell 5.6 per cent year on year in November, while exports were down 3.7 per cent.

However, the performance was an improvement on October's 16 per cent fall in imports and better than market forecast.

While China's surplus narrowed, it still remains a substantial 343 billion yuan or $US53 billion.

The continued decline in imports suggests that domestic demand remained weak.

However, NAB senior Asian economist Gerard Burg said the falling value of imports does not necessarily provide a good indication of what is happening given commodity prices are collapsing so rapidly.

"The ongoing weakening trend shows a slowdown in the old economy sectors such as industry and construction, while the more modern service sector is falling more slowly," Mr Burg said.

"The trade results have been providing a more muted effect on GDP, with a shift to consumption away from investment."

The cushioning effect of that economic transition and greater reliance on consumers is expected to show up in the batch of key data out on Saturday.

The November data will include the impact of the Singles Day sales, which produced the biggest online shopping binge on record, where shoppers splashed out more than $20 billion in a single day.

Retail sales are expected to show a strong 11 per cent increase over the month, while fixed asset investment — a measure of infrastructure and construction spending — is forecast to be growing at the slowest rate in two decades.

Yuan falls to lowest level in four months

Despite the better than expected trade data, the yuan fell to the weakest level against the US dollar in four months.

The yuan has been coming under increased pressure in recent months with China's foreign exchange reserves falling another $US87 billion last month to $US3.44 trillion.

ANZ's Li-Gang Liu said as China continues to open up its capital account, the yuan exchange rate is bound to become more volatile going forward.

However, Dr Liu noted the sizeable monthly trade surpluses — averaging around $US58 billion in the past three months — should help offset capital outflows and fend off depreciation pressure on the yuan.

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