China exports slid 8 percent last month, which is the most significant fall since April and eight times worse than analysts had predicted. Businesses now hope that Beijing would roll out a stimulus, as a short term solution.
But imports didn’t fare better. Experts disclosed that they had their greatest drop since last year, as analysts had predicted. Now economists are concerned that the weak domestic demand may not compensate for the drop in international demand of Chinese goods.
Analysts expected exports to fall only 1 percent after a 2.8 percent gain a couple of months ago. But the recent official data show what a reduced demand on the European market, and the U.S. – two of China’s major trade partners– can do the world’s second largest economy.
It is the first time, however, that exports to the U.S. experience a slip. Northern America is currently the country’s largest market for its Made-in-China-labeled goods.
Exports to the E.U. tumbled 12.3 percent, those to America slipped 1.3 percent, while those to Japan sank 13 percent.
Chinese economists believe that the country would now have to rely on domestic demand, as global demand may not recover too soon. But experiencing growth only through domestic demand needs some extra regulations and financial stimuli from the central government.
China imports slid 8.1 percent, while experts expected a maximum 8 percent loss. Analysts explained that the new results may mirror lower commodity prices. The trade surplus was also under expectations – $43.03 billion for July.
The recent trade data may blast all expectations for a boost in China’s economic growth for the second half of the year. Economists hoped for a turnaround after the positive results recorded in June.
The country’s manufacturing industry had the weakest outcomes in a couple of years in the wake of a weak global demand. China’s central bank recently announced that the descending trend may continue, but a stimulus was just a short-term solution. Central bank experts explained that growth needs to be retooled instead.
Analysts believe that the weak export data is also linked to a strengthening currency. In only one year, the yuan’s exchange rate rose nearly 14 percent, experts noted. Beijing kept the national currency at high levels for several reasons. The first reason was to cleanse country’s exports of low-end goods. A strong currency also boosted China residents’ buying power and domestic demand. Plus Chinese investors had enough buying power to invest abroad.
Image Source: Growth Nation
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