China Trade Data: Positive Signs for Short-term Domestic Demand. No Signs of Improving Global Trade.

China's exports fell 2.8% from last year, with annual imports rising for the first time since October 2014, up 1.5%.  Changes in commodity prices over the last year will keep import numbers positive for some time.  Weak global trade has kept export numbers weak, and there is no sign of that trend reversing.

I estimate that imports adjusted for commodity price declines rose 4.5%.  And imports for domestic use - excluding imports for trade processing - rose 6%.  That indicates some of the strongest import demand in months.  Import demand for manufactured goods was flat to mixed, but mostly positive.  

Here are some key points in the data:

  • China's imports of key hard commodities - by volume - are still very robust.  Crude oil imports in August rose 24% from last year, with iron ore import volumes up over 18%.  Ag imports - by value rose - a modest 4%, with soybeans imports down 1% over the last year.  Hard commodity imports are still rising as heavy industries see demand from rising construction and new projects.  With the recent drop in investments, that trend will reverse over the next 6 months, or so.
  • Hong Kong imports rose only 14%, after 122% last month and as high as 243% in May.  That indicates capital outflows hidden in trade invoices dropped considerably in August.  If illicit capital outflows are still taking place, they are not happening through Hong Kong trade channels.
  • Trade meant for processing is still weaker than trade for domestic purposes.  Imports for processing fell 4.5%, with general trade for domestic purposes rose 6.3% from last year.  Exports for processing fell 7.8% from last year, much weaker than overall exports.
  • Exports to countries on the global trade supply chain dropped in August.  Exports to Malaysia, Singapore, and Taiwan fell 8%, 7%, and 16% respectively.  That would indicate that there are no signs of improving global trade in these August numbers.
  • All-in-all, trade numbers continue to show domestic stability on the back of a temporary improvement in old economy sectors. The numbers are in line with recent PMI data.  But, the recent drop in investment growth will most likely lead to weaker import demand for commodities and heavy machinery by the end of the year.