H/t reader M.G.:
“China just released a very grim forecast according to the UK Guardian. Their lies are catching up with them. They were claiming to be exporting far more than they were, they got caught. Now, drops in exports to the USA over 5%, to the Eurozone, even bigger drop.”
– China warns of grim trade outlook after surprise 3% fall in exports (Guardian, July 10, 2013):
Figures defy expectations and likely to raise fresh concerns about extent of slowdown in economy and global demand
China has warned of a grim outlook for trade as the world’s second-largest economy surprised financial markets by reporting a fall in exports and imports when both had been expected to rise.
The figures, which follow a government crackdown on the use of fake invoicing that had exaggerated exports earlier this year, are likely to raise fresh concerns about the extent of the slowdown in the economy and global demand.
The June data, showing that exports fell 3.1% from a year earlier and imports dropped 0.7%, may now reflect the true trade picture, customs officials said.
“China faces relatively stern challenges in trade currently,” customs spokesman Zheng Yuesheng told a news briefing. “Exports in the third quarter look grim.”
The customs agency said exporters were losing confidence in the face of weak overseas demand, rising labour costs and a strong yuan currency.
The export fall was the first since January 2012. Economists had expected exports to increase 4.0% and imports to rise 8.0%.
China’s trade data is volatile and has been distorted by speculative capital flows across the country’s border. Doubts about the accuracy of the figures had abated slightly since the customs office and top foreign exchange regulator launched a campaign in May to crack down on fake export invoices.
Fake invoicing inflated China’s official import and export totals by $75bn (£50bn) in the first four months of 2013, local media reported on 14 June, citing an internal review by China’s commerce ministry.
The customs data showed that exports to the United States, China’s biggest export market, fell 5.4%, while exports to the European Union dropped 8.3%.
“The surprisingly weak June exports show China’s economy is facing increasing downward pressure on lacklustre external demand,” said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.
“Exports are facing challenges in the second half of this year. The appreciation of the US dollar and the Chinese government’s recent crackdown on speculative trade activities also put pressure on exports.”
China had a trade surplus of $27.1bn in June, the customs administration said, largely in line with the $27bn expected by economists.
China’s reform-minded new leaders have shown a tolerance of slower growth, although they still need to avoid widespread job losses that could threaten social stability.
Economists expect data next week to show that annual growth in China for the April-June quarter slowed down to 7.5%.
A continued slide in growth could test leaders’ resolve to tolerate a short-term slowdown in the economy while pressing ahead with efforts to revamp the economy for the longer term.