Growth Rates of Other Major Macroeconomic Indicators

Growth Rates of Exports, Imports, and Foreign Exchange Reserves

Brexit, together with the much lower-than-expected US GDP growth rate in the second quarter of 2016, heightened uncertainty about the global market. Nevertheless, the effects of RMB depreciation on foreign trade, and the ongoing implementation of “one belt, one road” policy, are expected to offset the downside risks of continued decline in exports. In addition, affected by decelerating domestic economic growth, imports growth would remain sluggish.

According to the CQMM, the total value of exports in dollar term (measured at current price) is forecast to be down by 6.01% in 2016, a drop of 3.79 percentage points over 2015. The total value of imports is projected to be down by 14.12%, matching its 2015 level (see Table 2.1).

Exports growth is expected to continue falling in the second half of 2016, down by 5.53 and 4.69% in the third and fourth quarter respectively. Owing to low prices of bulk commodities and RMB depreciation, import growth is expected to shrink by 6.65%. Nevertheless, as the process of cutting overcapacity accelerates and RMB depreciates further, the decline in import growth may not slow. Its growth is projected to continue to decline by 17.9% and 18.9% in the third and fourth quarter respectively. In 2016, the value of net exports is forecast to account for 1.25% of GDP.

Though the likelihood for the US to raise interest rates in the second half of 2016 had decreased, due to economic slowdown, RMB depreciation expectations and pressures of capital outflows still remain, suggesting that China is expected to deplete its foreign exchange reserves to stabilize RMB. China’s foreign exchange reserves is projected to fall to 2.98 trillion dollars at the end of 2016.

In 2017, owing to the recovery of external market demand, such as the recovery of US economy, and RMB depreciating further, China’ s exports are expected to rebound. The exports growth is projected to go up by 1.65%. As the increase in exports of processing trade is expected to lead to the increase in imports of processing trade, the decline in imports is expected to slow significantly, imports growth is expected to be down by 5.87%. Foreign exchange reserves at the end of 2017 is projected to fall to 2.67 trillion dollars (see Fig. 2.6).

Table 2.1 Projected growth rates of foreign trade (%)

Source: CQMM team calculations

Fig. 2.6 Projected changes in foreign reserves. Note FER denotes foreign exchange reserves. Source CQMM team calculations