CN: Merchandise Trade Balance

June 7, 2017 10:36 CDT

Consensus Actual Previous
Level [$] $46.1B $40.81B $38.05B
Exports-Y/Y [$] 7.0% 8.7% 8.0%
Imports-Y/Y [$] 9.0% 14.8% 11.9%
Level [Yuan] ¥281.6B ¥262.3B
Exports-Y/Y [Yuan] 15.5% 14.3%
Imports-Y/Y [Yuan] 22.1% 18.6%

China's trade surplus in US dollar terms widened from $38.05 billion in April to $40.81 billion in May, falling short of the consensus forecast of $46.1 billion. Both exports and imports increased above expectations, but imports did so to a greater extent. Year-on-year growth in exports picked up from 8.0 percent in April to 8.7 percent in May, above the consensus forecast of 7.0 percent, while year-on-year growth in imports rose from 11.9 percent to 14.8 percent, well above the consensus forecast of 9.0 percent.

The pick-up in year-on-year growth in China's exports in May relative to April was largely driven by stronger demand from the European Union. Exports to the EU rose 9.7 percent on the year in may, up from 4.0 percent in April. Exports to the United States grew 11.7 percent on the year in May, unchanged from the growth seen in April, while year-on-year growth in exports to Japan weakened from 13.3 percent to 3.7 percent.

In seasonally adjusted terms, Chinese exports fell 0.3 percent on the month in May after an increase of 7.8 percent in April. Seasonally adjusted imports fell 3.3 percent on the month, partly reversing the increase of 7.5 percent in April.

Looking at year-to-date data, for the five months to May 2017 China has recorded a trade surplus of $143.8 billion, around a third lower than the surplus of $217.5 billion recorded in the equivalent period in 2016. This smaller year-to-date surplus largely reflects the impact of higher global oil prices on Chinese imports. The value of these imports is around $113 billion higher so far this year than in the equivalent period in 2016, whereas the value of China's exports is up only around $36 billion.

In domestic currency terms, China's trade surplus increased from CNY262.1 billion in April to CNY281.6 billion in May. Exports grew 15.5 percent on the year in yuan terms in May, up from 14.3 percent in April, while year-on-year growth in imports in yuan terms accelerated from 18.6 percent to 22.1 percent.

The Merchandise Trade Balance is the difference in value between imported and exported goods. Data are denominated both in U.S. dollars and renminbi. A positive number indicates a surplus meaning that more goods were exported than imported.

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.