Chinese Surplus Slips

Market Trends - 08/12/2015

The Chinese economy continues to struggle as the end of the year approaches. Early statistical data for the country’s decelerating GDP expansion and Purchasing Managers’ Indices were a strong indication that a decline in the trade surplus would certainly follow. According to the latest figures, the world’s second largest economy saw exports fall at an unexpected -6.80% annualized pace in November, marking the fifth consecutive month of declines. Broadly speaking, global exports have slipped demonstrably according to the data, with China experiencing a -9.00% contraction in shipments to the European Union and a decrease of -5.30% to the United States. Imports also continued their 13-month slide, dropping by -8.70% year over year, beating expectations of a -12.60% slide but enough to signal a continuation of weak demand. Compared to a year earlier, China has increased its import volumes for iron ore, crude oil and agricultural products while it minimized coal and steel in the first eleven months of 2015.

With the US rate hike potentially nearing, analysts are uncertain if the numbers indicated a potential improvement in China’s domestic demand, which has been a key factor in driving world commodity prices to their yearly lows. The slowdown in demand from China has impacted a range of natural resources, further accelerating the decline of commodity prices that could have resulted in the latest moderation of declining imports. While in a speech from November, Chinese President Xi Jingping pledged that the country's economic growth rate will not be less than 6.50% in the five years to 2020. In order to support the country’s economy, the People's Bank of China has cut interest rates six times and devalued its currency against the U.S. dollar this year alone in a sign policy efforts have not been successful. It is expected that weak household demand and exports along with spare factory capacity, high debt levels and cooling investment will see China report its slowest GDP growth in the last 25 years.


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