Weak trade data for August has underlined why the Chinese authorities ordered a 1% cut in bank reserve ratios on Friday night.
Trade figures from China’s Customs Administration on Sunday revealed that exports unexpectedly fell in August while imports shrank for the fourth month in a row.
Analysts said the data supported the view that there is a growing need for more stimulus in the Chinese domestic economy as the trade war with Donald Trump’s US continues.
Friday’s cut in the banks’ reserve requirements was the third this year and the seventh since early 2018.
The cut frees up more money to be lent to businesses. Especially small and medium companies and came after a cabinet meeting signaled that more policy loosening may be imminent.
August exports fell 1% from August 2018, the biggest fall since June, when it fell 1.3%. The market had been looking for a 2% rise after July’s surprise 3.3% rise.
Imports though are a huge concern – they fell by 5.6% in August after a 5.3% drop in July – and the lack of demand tells us a lot about the weaknesses in Chinese manufacturing in particular where price deflation has re-emerged.
Chinese imports have now declined in every month of 2019 apart from April.
Economists say to give the weak import performance some context, average monthly growth in imports in 2018 was 16.6%, with only a single negative reading, in December 2018 when the weaker trend first emerged.
Overall, China’s trade surplus in August was $US34.84 billion, down from $US41.61 billion in July and well under forecasts for $US44.25 billion.
The August figure was up 32.5% from that for August 2018.
China’s trade surplus with the United States stood at $US26.95 billion in August, down from July’s $27.97 billion.
It totaled $US195.45 billion in the first eight months of 2019.