CN: Merchandise Trade Balance

Fri Aug 07 21:00:00 CDT 2015

Consensus Actual Previous
level $53.7B $43.03B $46.6B
Exports-Y/Y -3.0% -8.9% 2.1%
Imports-Y/Y -8.0% -8.6% -6.7%

China's trade figures shocked analysts. July's unadjusted merchandise trade surplus was $43.0 billion, down from $45.7 billion in June. Exports plunged 8.3 percent against expectations of a 3.0 percent drop. Imports sank 8.1 percent against expectations of a 8 percent drop. The year to date trade balance was $305.2 billion compared with $212.9 billion in the same period a year ago. For the seven months through July, exports were down 0.8 percent on the year while imports dropped 14.6 percent. On a seasonally adjusted basis, exports slid 3.4 percent on the month after increasing 1.5 percent in June while imports declined 3.8 percent after jumping 6.9 percent in June. On the year, seasonally adjusted exports dropped 7.9 percent while imports were 8.4 percent lower.

China's top government body, the State Council, said last month that it would give high priority to the nation's trade sector, providing tax breaks and cutting red tape while reducing import duties. The government has also accelerated a range of infrastructure projects to boost demand at home. Meanwhile, the central bank has cut interest rates four times since November in an effort to help struggling domestic companies.

Adding to the problems for exporters is the relatively strong Chinese currency, which has held steady against a buoyant dollar. That has carried the yuan more than 10% higher against the euro, providing a drag on exports to some key European markets.

The merchandise trade balance is the difference in value between imported and exported goods. A positive number indicates that more goods were exported than imported. The data are released in yuan but are converted to U.S. dollar terms.

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they also affect currency values in foreign exchange markets. However, the foreign exchange impact is muted here given that the currency is pegged to a basket of currencies and its value is determined daily by the government.

China's growth stems from its exports to the industrialized world. And in turn, global growth is dependent upon Chinese growth, especially since the financial woes of 2008.

Merchandise trade statistics are compiled and published by Customs General Administration (CGA) on a monthly basis. Preliminary estimates are available about 13 days after the reference month with details available within 25 days. Since 1980, the compilation of Customs statistics follows the concepts and definitions of the International Merchandise Trade Statistics: Concepts and Definitions. Data are released for total imports and exports in the Chinese currency and the U.S. dollar. There are five main categories each for primary and manufactured goods. Detailed information is available by category, destination country, foreign enterprises and domestic region to name a few. Geographically, the data covers the customs territory of the mainland China and excludes Hong Kong, Macao and Taiwan.