China’s trade figures for October will be issued tomorrow and another big trade surplus is expected as imports continue to perform weakly.
Helped by falling global prices for commodities such as oil, copper, iron ore and grain, but driven by the sluggish level of demand from domestic companies, China’s monthly import bill has actually fallen in a couple of months this year.
Imports rose 7% last month, after falling in August, the trade surplus in September more than doubled from last year to $US31 billion, but was sharply down on the record $US49.8 billion seen in August.
In the first 9 months of 2014 exports were up 5.1% at $US1.7 trillion, while imports were up just 1.3% at $US1.46 trillion. In the September quarter exports were up 12.8% year-on-year while imports rose a mere 0.9%.
And China’s trade surplus in the first three quarters jumped 37.8% to $US231.6 billion, purely as a result of the sluggish growth in imports, driven by falling prices for those commodities imported and weak domestic demand. Also helping keep import prices lower is the rising value of the Chinese yuan.
But the weak level of import demand is worrying the government to the point where the country’s cabinet revealed a surprise package of measures yesterday afternoon aimed at encouraging imports.
The measures include bank credits and tax support and follows a similar move in may to boost exports, a statement issued by China’s State Council said.
Financial institutions will be urged to step up lending to companies that import high-tech equipment and components, the Council said. The government will encourage tax authorities to study preferential tax policies for imports of products used in scientific research.
The government plans to accelerate a trial program in the Shanghai Free Trade Zone to ease restrictions on imports of some types of motor vehicles.
Beijing also intends to speed up efforts to reach agreements with other countries regarding the inspection and quarantine of agricultural products in a bid to facilitate imports.
The State Council said government agencies, including the central bank and commerce ministry, would likely provide further details about the implementation of the measures in the near future.
Economists said they expect trade growth slowed in October. Imports are forecast to have risen 5% year-over-year in October, with exports up 10%.
We will see tomorrow, but the best way to boost imports is to lift domestic demand.
