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Cause for concern? China’s export growth slowdown just a blip – analysts

The unexpected slowdown in China’s export growth in August is likely to have been a blip rather than the start of a new trend, analysts say.

China’s General Administration of Customs reported on Friday the value of outbound shipments rose 5.5 per cent year on year in August, down from growth of 7.2 per cent a month earlier. The result was below a median forecast of 6 per cent growth from economists surveyed by Reuters.

Betty Wang, senior China economist at ANZ, says the slowdown in export growth is “likely to be short-lived,” even withstanding a strengthening renminbi – the currency reached a 21-month high against the dollar on Friday.

A high base is one reason for the slowdown in August. In terms of trading partners, export growth to the EU, Japan, and the US eased but exports to ASEAN jumped.

Since the yuan’s rapid appreciation against the dollar in the past one month or so, market observers have started to worry whether a strong currency will affect China’s exports and trade balance and perhaps even trigger government intervention, but we beg to differ.

If Apple’s share price is any indication, given that electronic shipments account for a major share of China’s total exports, the country’s export outlook is likely to be positive for now.

Capital Economics China economist Julian Evans-Pritchard likewise believes “further downside to exports should be limited by the fairly positive outlook for China’s main trading partners”. However, he does doubt if “the current pace of commodity imports is sustainable given signs that capital spending is slowing and that policy tightening is weighing on credit growth.”

Imports to China lifted 13.3 per cent in August compared to the same month a year ago and 11 per cent in July. It was the tenth straight month of expansion and beat a median forecast predicting import growth would instead slow to 10 per cent.