BOFIT Weekly Review 2016/42
Value of China’s foreign trade declines even as trade volume increases
The fall in the value of China’s exports since spring 2015 accelerated in September. Dollar-denominated exports were down 10 % y-o-y. After falling since autumn 2014, the value of imports rebounded slightly in August, only to sink again by 2 % y-o-y in in September. With the yuan down nearly 5 % y-o-y against the dollar last month, the drop in the value of foreign trade was more modest in yuan terms. The September foreign trade surplus fell to $42 billion.
The value of trade was depressed by drops in export and import prices, while the volume of exports in June-August was up 5 % y-o-y and the volume of imports up 3 %. Also foreign trade cargo figures from China’s ports suggest a slightly stronger trend in volume growth than last year. Import volumes of many critical commodities have been rising. For example, China continues to build up its strategic oil reserves, with crude oil imports rising 15 % this year.
The IMF’s latest World Economic Outlook (WEO) notes that the slowdown in growth of global trade arise from depressed global economic growth and slowdown in fixed investment growth in particular. Moreover, the growth in international trade has also been dampened by increased protectionism and decreased importance of international production chains. These factors are likely to underlie the slowdown also in the growth of Chinese foreign trade. Chinese statistical data show that the share of processing trade has fallen from about 55 % ten years ago to around 40 % today, and that this declining trend is apparently set to continue. Production-chain-related imports have also fallen in the past decade from about 50 % to just over 30 %, and have remained at that level for several years now.