China’s August import slump raises fears of sharper slowdown
BEIJING/SHANGHAI: China’s imports shrank far more than expected in August, falling for the 10th straight month and adding to global investors’ concerns that the world’s second-largest economy may be slowing more sharply than earlier expected.
Imports fell 13.8 per cent from a year earlier, more than the 8.2 per cent drop economists had expected and an 8.1 per cent decline in July, reflecting both lower world commodity prices and persistently sluggish demand at home.
Global financial markets have been rattled in recent weeks by fears that China’s slowdown could drag on already sluggish global growth, while adding to deflationary pressures by depressing prices. Indeed, the data on Tuesday showed sharp drops in imports from Australia, the European Union and Japan, which tumbled 29.6 per cent, 21.7 per cent and 14.7 per cent, respectively.
China’s imports from the United States also fell at a sharper pace than in July, dropping 5.9 per cent.
“Imports are much worse than expected and are also a leading indicator for exports, as around half of China’s exports are processing trade,” said Nie Wen, analyst at Hwabao Trust, Shanghai.
“I’m not optimistic prospect of exports and about the it’s unlikely China can achieve its export target this year.” Wen predicted the central bank will have to cut banks’ reserve requirements at least three more times this year to pump more money into the slowing economy and counteract the impact of capital outflows as investors move their money elsewhere.
Exports in August dropped 5.5 per cent from a year earlier, slightly less than a 6.0 per cent decline forecast in a Reuters poll, and improving from an 8.3 per cent drop in July.
That left the country with a trade surplus of $60.24 billion for the month, the General Administration of Customs said, far higher than forecasts for $48.20 billion.
Global investors will be combing China’s August data over the coming weeks to see if the economy is at risk of a hard landing, with some analysts fearing current economic growth rates are already much weaker than official data suggest.
Though most economists believe a gradual and prolonged slowdown is more likely, a stock market crash and the unexpected devaluation of the yuan currency last month have rattled confidence in the government, both inside and outside of China.