Global trade slide sees slow boat from China

The downturn in global trade is hitting Chinese exports hard.

A ship in the port of Qingdao, where the trend of rising imports and falling exports is worrying economists concerned about the health of global trade.

The downturn in global trade is hitting Chinese exports hard, causing them to dive by 5.6 per cent in September in yuan terms compared with the previous September, or by 10 per cent in US dollar terms.

The trade data announced yesterday by the General Administration of Customs pushed the Australian dollar down as soon as it was released.

Imports rose 2.2 per cent in yuan terms, and fell 1.9 per cent in US-dollar terms — the rise being attributed chiefly to a sharp rise in the oil price.

This trade result was about three times worse than that forecast by Reuters’ panel of analysts.

In September, the yuan was worth about 5 per cent below its US dollar value of a year earlier, and this month reached its lowest rate against the dollar in six years. But this does not appear to have helped export attractiveness significantly.

In US dollar terms, exports to the European Union fell 9.8 per cent, to Britain 10.8 per cent, and to America 8.1 per cent.

China continued to chalk up a trade surplus — of 278 billion yuan, or $US41bn ($54bn). And sales are expected to pick up this month, with shipments under way for Christmas, the big annual retail boost.

David Qu and Raymond Yeung, economists with ANZ Research, said the export downturn was broadbased, and could not even be offset by shipments of the new iPhone, which drove a 33 per cent rise in value for Apple smartphone exports.

They expect further downside risks holding trade down — “stemming from the US election to the UK’s execution of the Brexit process”.

Hu Yifan, the chief China economist at UBS Wealth Management, noted that the gloomy overall picture was reflected within China: “Domestic demand is equally as weak as global demand.”

Julian Evans-Pritchard, a China economist at Capital Economics, said the poor import figure might have been triggered by a drop in import volumes of a number of key commodities, including iron ore and copper. But there has been no indication of a let-up in the government’s determination to continue driving construction to maintain economic growth above 6 per cent, so falls in commodity volumes may be attributed to coincidental shipping delivery dates or other temporary factors.

The overall trend for China, however, fits patterns confirmed by the World Trade Organisation which last month slashed its forecast for global trade growth for 2016 from 2.8 per cent to 1.7 per cent.

Private investment in China has slumped this year, so that with exports being so badly hit, Chinese growth depends the government-led stimulus, being deliv­ered chiefly through local government investment vehicles, and on a real estate boom that appears increasingly speculative.

President Xi Jinping and Premier Li Keqiang have this week been cited as trying to talk down the property boom before it becomes a dangerous bubble.

More than 20 Chinese cities — led by Beijing — whose real estate prices have risen especially sharply, have responded by increasing the downpayment required for a mortgage, and by seeking to prevent investors from buying second or third properties.

Those buying first homes need to provide 30 per cent downpayment, and those seeking a second apartment need 70 per cent.

And on Monday, new guidelines were published by the central government for the use of debt-for-equity swaps and mergers in the face of growing concern about soaring corporate credit, worth about 250 per cent of the country’s annual gross domestic product.

Beijing vowed that from now on, there would be “no government bailouts, no free lunch for troubled firms, and no administrative matchmaking”.