China: Trade balance figures disappoint in June – UOB

Economist at UOB Group Ho Woei Chen, CFA, comments on the recently published trade balance figures in the Chinese economy.

Key Takeaways

China’s exports and imports (both USD and CNY terms) contracted by a sharper pace in Jun in further signs of fading recovery momentum in its economy. Declining export and import prices could also have contributed to the weak data which are reported in nominal values. 

Only a handful of products recorded y/y increase in exports including motor vehicles, LCD panels and refined petroleum products. Meanwhile, shipments of high-tech products continued to contract, by -16.8% y/y in Jun compared to 13.9% y/y in May.  

In volume terms, China’s imports of commodities including crude oil and coal strengthened in Jun. Copper and iron ore imports also held up well above the same period in 2022 despite slowing economic activities.

In 1H23, China’s exports and imports contracted by -3.2% y/y and -6.7% y/y respectively. The weaker than expected June trade data suggests downside risk for our forecast for China’s export and import which are currently at -3.0% and -2.0% for 2023 respectively. 

Recent data had turned out to be weaker than expected, suggesting downside risk to our 2Q23 GDP forecast of 7.8% y/y, 0.9% q/q. The 2Q23 GDP report is due next Mon (17 Jul). We expect more measures to stimulate growth in 2H23 to be announced soon after.