Foreign Trade Growth Remained Sluggish
Global trade remains very subdued in the first half of 2016. According to the update forecast released by the International Monetary Funds (IMF) on July 19, 2016, the growth rate of global trade in goods and services is expected to be 2.7%, only slightly up by 0.1 percentage points over last year. Owing to the weak external demand and outward transfer of industries, China’s export remained sluggish. In the first half of 2016, the total value of exports in dollar terms dropped by 7.7% YoY, down by 8.6 percentage points over the same period last year (see Fig. 1.14). By country and region, the decline of exports is closely related to that of exports to the US and the ASEAN. In the first half of 2016, the value of exports to the US and the ASEAN dropped by 9.9 and 8.4% respectively, while the value of exports to these two regions accounts for 30.1% of total value. In terms of type of trade, the processing trade exports fell by 9.9% YoY, while the general trade exports decreased by 7.7%.
Fig. 1.14 Foreign trade growth remained weak YoY. Source CQMM team calculations on CEIC data
In the near term, the external demand will remain weak. Such great events as Brexit, the South China Sea event, and the pickup of international trade protectionism, are expected to put pressures on exports. Though the continued RMB depreciation is expected to support exports, generally speaking, it is hard to be optimistic about China’s export prospects.
Owing to economic slowdown and no significant improvement in domestic demand, imports continued to hover low. In the first half of 2016, the total value of imports in dollar term dropped by 10.2% YoY, the rate of decline slowed by 5.4 percentage points over the same period last year (see Fig. 1.14). As bulk commodities account for a large proportion of China’s imported commodities, with the decline in prices for imported bulk commodities slowed, the fall in total value of imports eased correspondingly. In the first half of 2016, of the average import prices, the rate of decline in iron ore slowed by 23.3 percentage points over 2015, in crude oil slowed by 13.4 percentage points, in coal slowed by 1.7 percentage points, and in copper slowed by 1.7 percentage points. The increase in both volumes and prices of imported bulk commodities eased falls in the total value of imports.
In terms of merchandise, mechanical and electrical products and traditional labor-intensive products are still the main categories of exports, though the growth rates of them decreased simultaneously. In the first half of 2016, the value of exports in dollar term for mechanical and electrical products fell by 8.0% YoY, accounting for 57.2% of the total value of exports. Of this total, for integrated circuit increased by 2.9%, for solar batteries export expanded by 1.9%. The value of exports for traditional labor-intensive products dropped by 5.1%, accounting for 21% of the total value of export. Of this total, for toys grew by 8.9%, while for textile, wearing apparel, and plastics only fell slightly, suggesting that some traditional products still maintained their competitiveness.