China’s Export Stagnation and Shrinking Trade Balance in September

China's trade balance faced a setback in September as export growth slowed significantly, reflecting ongoing challenges in the country’s economy. The trade balance came in at CNY 582.62 billion, down from CNY 649.34 billion in August, marking a contraction in surplus. However, in US Dollar terms, China's trade surplus widened slightly.

author: Economician

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category:economy

Key data from the report highlights:

Exports rose by only 1.6% year-on-year (YoY) in September, a sharp decline from the 8.4% growth in August, underscoring a significant slowdown in external demand.

Imports saw modest growth at +0.7% YoY, up from 0% in the previous month, indicating some domestic recovery but still reflecting weakness in consumer and industrial demand.

The overall trade balance in dollar terms stood at $81.7 billion, lower than the $89.8 billion expected and the $91.02 billion previously recorded.

In terms of projections:

Exports (YoY) were up by 2.4%, missing the expected 6.0% growth and down from 8.7% previously.

Imports (YoY) grew by 0.3%, which also fell short of the 0.9% forecast and was lower than the 0.5% growth in August.

On a more positive note, China saw a surge in new loans in September, with CNY 1590 billion in new loans, far exceeding the CNY 1100 billion expectations, boosted by lower interest rates. The M2 Money Supply also grew at 6.8% YoY, surpassing the forecasted 6.4% growth, indicating higher liquidity in the economy.

Despite the increase in loans and money supply, the slowing trade numbers and weakening export demand highlight ongoing economic struggles in China, particularly in its manufacturing and industrial sectors, which are still grappling with external pressures such as lower global demand and trade tensions.

Market Reaction

In response, USD/CNH rose to 7.0912, with 0.18% Yuan weakness against USD. Considering positive expectations for the USD and weaker Chinese economic data, USD/CNH can continue its smooth upward trend.