China Imports Weaken

October 13, 2015Chinaby EW News Desk Team


Imports into China fell for the 11th month in a row, raising concerns that Chinese growth is worsening.  Imports into China fell 17.7% in local currency terms in September, acceleration from the 14.3% decrease in August. China’s trade surplus rose to 376.2 billion yuan, or about $59.5 billion, above expectations. However, China’s weak trade surplus was worsened by a 1.1% decline in exports, although that was better than the 6.1% decline seen in August.

Falling imports in China have a number of causes, but analysts are pointing to the weak domestic demand in the country just when Chinese policy is attempting to shift the country from an export-driven growth engine economy modeled after neighbors South Korea and Japan, and towards a consumption-driven economy, that provides more services, similar to the United States and Europe.

While both Japan and South Korea were largely unsuccessful in making that transition without a massive economic crisis—and Japan’s economy still remains perpetually underperforming relative to other developed economies—China hopes that aggressive monetary policy may help it avoid that fate.

Nonetheless, the yuan fell in early trading as several analysts in China released reports warning that the economy is weakening and that domestic growth is below official numbers. The People’s Bank of China raised its currency peg to 6.3231.

China’s new trade balance, of a near $60 billion surplus, is substantially above expectations. Many economists had expected a turnaround in domestic demand to drive greater imports and lower that surplus, while a growth in foreign direct investment is expected to drive that surplus down further as the country’s capital account rises. Nonetheless, neither trend materialized in the recent data.

Rising Oil Imports

Despite the weak demand for imports, there is one commodity that China is importing in abundance: crude oil.

In September, the country’s crude imports rose to 27.95 million metric tons, an 8.8% rise from August’s figure, making China the top buyer of oil in the world for much of 2015. Some analysts note that the oil stockpiling is a strategic move, with China and Chinese firms looking to capitalize on low crude costs on a slump in oil prices.

The increase in oil imports does not reflect a rising consumption of oil, however. Estimates of energy consumption in China indicate that it is seeing significantly lower energy usage throughout the country, partly reflected in the country’s weak economic growth rate.

Meanwhile, Chinese refiners are seen as processing crude at an accelerated rate, with expectations for more oil refining operations in the near term to allow for further imports. However, rising oil prices may mitigate demand for crude oil in the country, with some analysts expecting oil prices to continue to rise with the onset of winter.

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