NOVEMBER 9TH 2015
CHINESE BUYERS NOT FILLING TRADE GAP: SLOWDOWN MIGHT BE HARDER THAN EXPECTED.
Very relevant numbers on China’s economic adjustment have been widely shared this week. Imports by China fell 18.8% compared to October last year. This meant a 1.6% improvement over last September’s drop. In export, the volume decreased 6.9% in the fourth consecutive month. This leaves China with a $61.6bn trade surplus, the highest since China’s reform. The situation reflects both domestic and external dynamics. On the one hand, China is in the middle of a fundamental economic change, while the world deals with rather volatile markets.
China has tried to move form a heavily export-based economy towards a more consumer-base one. But the transformation is not coming easy. Trade numbers are changing faster than China’s neo-consumerist culture. According to Liu Ligang, an economist at ANZ bank, soft domestic demand is a major factor behind the restructure.
The export sector will not have it easy neither. Currency depreciation deterred export competitiveness. Even if some developed countries see a moderate recovery and bring some support to global final demand, currency devaluation of other emerging market currencies will keep pushing down.
The problem with a large trade surplus is that it could offset capital outflow and curb the expected depreciation of the Chinese Yuan. Due to its importance in China’s economic structure, it also forces the authorities to (re)asses their goals, as Premier Li Keqiang has stated that an annual growth of 6.53% -instead of previously stated 7%- over the next five years will be enough to achieve a “moderately prosperous society”.
This information comes right after the meeting of the Fifth Plenary Session of the 18th Communist Party of China Central Committee. On the occasion, relevant decision for the new Five Year Plan were taken, such as relaxing the one-child policy.
Annex Asia Publishing
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