Slowing Chinese export growth in July surprises analysts


China’s export growth slowed in July as demand from the US and EU faltered.

Analysts had predicted further gains in the lead up to the ocean shipping peak season but instead export growth in US dollar terms fell to 7.2% year-on-year last month after rising 11.3% in June.

Japanese investment bank Nomura said the result had disappointed expectations - Nomura had a predicted a 10.5% year-on-year surge in July exports and the consensus among analysts was for an 11% year-on-year increase.

The analyst said growth was “mainly weighed on by exports to the US and EU which fell sharply by 10.9 percentage points and 5.0 percentage points, respectively, to 8.9% y-o-y and 10.1% in July”.

Export growth to Japan and some Asian economies improved slightly but Nomura predicted that trade tensions between the US and China “may escalate due to geopolitical issues, putting pressure on China’s export growth in the short term”.

By product type, export growth in mechanical & electrical product, hi-tech product and automatic data process machines dropped significantly in July. “Notably, these products are mostly intellectual property-related and may be vulnerable if the Trump administration decides to impose tighter trade sanctions on China - although we do not expect any imminent action,” added Nomura.

The analyst concluded that trade growth may have peaked in Q2 and could now slow in the second of the year as “potential trade frictions between China and the US, rising geopolitical risks and appreciation of RMB against USD in H1 are likely to weigh on the near-term export outlook”.