So what to make of China’s trade figures for June showing a fall in exports and imports?
Well, if you listen to the Chinese themselves its all a bit grim: "China faces relatively stern challenges in trade currently," customs spokesman Zheng Yuesheng told a news briefing In Beijing on the June trade figures yesterday. "Exports in the third quarter look grim," added Zheng.
And the customs agency said exporters were losing confidence in the face of weak overseas demand, rising labor costs and a strong yuan currency, according to reports on Reuters and other news agencies.
Exports fell 3.1% from a year earlier, the General Administration of Customs said in Beijing.
It was the first fall in exports since January 2012 when they were reduced by the New Year holidays falling in that month. Imports fell 0.7% in June after a 0.3% drop in May.
Leading the way, iron ore imports which came off the boil, falling 9% from May to a still high 62.3 million tonnes in June.
The news and then the comments knocked the strengthening Aussie dollar lower by around a third of a cent yesterday afternoon to around 91.70 US cents. It had been over 92 US cents. It was trading around 91.20 US cents this morning.
It also knocked the local stockmarket lower in the afternoon as well, ending another solid start to trading. Other markets traded weakly, but Wall Street dipped after the US Fed’s minutes of its last meeting showed strong support for ending the current round of easing quickly, starting later this year.
Total Chinese foreign trade volume declined 2% year on year to $US321.51 billion in June. For the first six months of 2013 total foreign trade rose 8.6% to just on $US2 trillion.
The fall in exports in June compares to the 10.4% average increase for the first six months of the year, while the 0.7% drop in imports is well under the 6.7% rise in imports in the six months to June.
Imports were down 4.6% from May and imports were 9.6% lower than May, despite weaker commodity prices.
Now that’s certainly tell us that the Chinese economy is sluggish and confirms the weak reports of manufacturing activity from the two monthly reports issued on the first of each month.
But what we can’t be certain is how much that slow down has impacted exporters and imports and how much the official crackdown on fudged figures and money shifting has also produced a ‘cleaner’ and lower set of figures.
The foreign trade report for June was the first since the start of the government’s crackdown on the use of fake export shipment documents to close a loophole for short-term money inflows which had exaggerated China’s export performance. A leaked report last month claimed that export income was overstated by $US75 billion in the four months to April because of over billing.
China’s trade data may be being distorted by speculative capital flows hiding in invoices issued by some of the country’s biggest exporters and paid by some of the biggest importers.
Doubts about the accuracy of the figures have been around for years, but flared in late 2012 and into this year with trade data (especially involving exports and imports into and out of China to Hong Kong) being questioned as to its accuracy.
To try and answer these concerns, China’s customs office and chief foreign exchange regulator launched a campaign in May to crack down on fake export claims. We have had no official statement on that crackdown though.
As it was, China’s trade surplus was $US27 billion (economists had predicted $US27.1 billion, so give them a prize) in June against $US20.4 billion in May.
China’s exports to the US, its biggest market, fell 5.6%, while shipments in June to the EU were down 8.3%.
That’s understandable given the recession covering much of Europe and especially the eurozone.
But the fall in exports to the US, just as that economy is starting to gather pace, does seem a little odd.
The central bank will publish data on credit and money supply over the next week.
But the most important will come next Monday (July 15) with the publication of June data on industrial production and retail sales along with first-half fixed-asset investment, plus the all important second quarter GDP.
Market estimates are for a rise of between 7.3% and 7.5% which if reported would be well down on the weak (in Chinese terms) 7.7% for the first quarter.
The IMF this week cut its estimate for China’s 2013 growth to 7.7% from 8.3% in its April forecast. It also expressed concern as the strength of the economy going forward into 2014.
China’s consumer price index rose 2.7% in June from a year earlier. But producer prices fell 2.7% which tells us a bit more about the sluggish pace of demand and activity in the economy.
