China's total trade slumped in the first half of this year, official data showed Monday, falling well short of the government's targets and dealing a blow to the global economy from its biggest trader in goods. Two-way trade for the first six months of the year fell 6.9 percent to $1.88 trillion, the General Administration of Customs said.
China is the world's second-largest economy and a key driver of global growth, with an outsized impact on resource-rich supplier countries such as Australia. Over the six months, trade with the European Union declined 6.7 percent, Customs said, and with Japan it dropped 10.6 percent.
Monday's result was well below Beijing's official target for the year for trade growth of "about 6.0 percent". That figure was a reduction from the 7.5 percent set for 2014 - when values expanded only 3.4 percent, the third consecutive year the goal had been missed. "Commodity prices fell significantly, dragging down growth in import value," Customs spokesman Huang Songping told reporters, adding that "sluggish foreign demand" was the "major factor" affecting trade growth.
"Export costs remained high, undermining export competitiveness," he said, adding that by June 30, the yuan had strengthened 0.2 percent against the dollar from the start of the year, 6.9 percent against the euro and 2.2 percent against the yen. "The downward pressures on the domestic economy increased and the demand for imports was weak," he said.
For June, imports fell for the eighth consecutive month, Customs said, dropping 6.1 percent year-on-year in dollar terms to $145.48 billion. But exports increased 2.8 percent to $192.01 billion on-year - snapping a run of three monthly declines in a row - and the country's trade surplus leaped 47.5 percent to $46.54 billion. The monthly percentage changes were slightly smaller in China's yuan currency. Louis Kuijs, a Hong Kong-based economist with the Royal Bank of Scotland (RBS), said there had been "extreme weakness" in the first five months of the year.
But there were signs domestic demand was strengthening and the monthly June data suggested "the momentum is starting to improve". "That is definitely encouraging for the rest of the world," he told AFP. Chinese stock markets have been in turmoil with shares falling more than 30 percent in less than four weeks, but the benchmark Shanghai Composite Index rose strongly, closing 2.39 percent higher and continuing positive momentum from the end of last week after aggressive official support measures.
The latest data comes as Chinese authorities manage what they describe as a "new normal" economy in which they steer it away from a traditional model of high growth based on big investment projects and towards one where consumer demand takes prominence. China's gross domestic product (GDP) expanded 7.4 percent in 2014, the lowest rate in nearly a quarter of a century, and signs of further weakness have mounted this year. GDP expanded 7.0 percent in the January-March period, the worst quarterly result in six years.
China announces second-quarter GDP figures on Wednesday and the median forecast in an AFP poll of 14 economists indicates GDP expanded 6.9 percent in April-June. ANZ economist Liu Li-Gang said the trade data mean the second-quarter GDP figure "will underperform" as both imports and exports were weak during the latest three-month period, predicting that the GDP figure could come in at 6.8 percent. For all of 2015, the AFP survey predicts growth at a median 7.0 percent, more optimistic than a forecast of 6.8 percent in a similar poll in April and in line with the government's official target of "about 7.0 percent".
Authorities have taken steps to boost slowing economic growth, cutting interest rates four times since November while also lowering the amount of cash banks must hold in reserve in a bid to boost lending. "We expect import growth to continue to rebound as policy support helps to stabilise domestic demand," Julian Evans-Pritchard, China economist at Capital Economics, wrote in a reaction.
The contraction in imports in June was better than May's 17.6 percent decline, while on a month-on-month basis imports increased 10.9 percent in June from May, according to Customs. Analysts see more such measures on the horizon. "We continue to expect more policy easing to offset the headwinds to growth", Nomura economists said in a note.