BOFIT Weekly Review 2016/32
Value of Chinese foreign trade declines, volume increases
The value of Chinese goods imports and exports measured in dollars has declined 7–10 % this year. Much of the decline reflects exchange rate shifts. The yuan was down about 7 % y-o-y against the dollar in July. As a result, a better perspective on foreign trade might be offered by volume trends. Volumes of both exports and imports have risen about 3 % y-o-y this year. Export growth accelerated slightly in the second quarter.
Export volumes rose in nearly all sub-categories. Export volumes in machinery & equipment, the largest sub-category, have increased on average about 1 % y-o-y over the first six months of this year. Exports growth was highest for coal, crude oil, gas and refined oil products. In a notable bifurcation of import trends, import volumes of commodities and foodstuffs have increased, while import volumes of industrial products have fallen from a year ago.
While the weak yuan has boosted price competiveness of Chinese products, export gains have been fairly slim. Moreover, a rapid rise in Chinese labour costs that has offsets at least partly gains in price competitiveness. Company surveys give a contradictory picture as to whether the export outlook has improved over the course of this year or not. The impact of yuan depreciation to Chinese exports is also diminished by the fact that it also means higher import prices. About 35 % of Chinese exports still consists of “processing trade,” that is, export activities that involve assembly of imported components or processing of semi-finished imported products. In recent years, the share of processing trade in China’s overall trade has dwindled and is expected to continue to fall in coming years.