6 Reasons Why The Chinese Trade Data Was So Bad

workers cut pork at a factory in China

The big story today is the weak trade data out of China.

Exports declined 3.7%.

Imports fell 0.7%.

But why was it so bad?

Ting Lu and Xiaojia Zhi at Bank of America offer 6 reasons:

The negative trade growth in June might be the consequence of a few factors: (1) A sluggish global economy, especially the European economy which is the largest market for China’s exports; (2) Real appreciation of RMB versus its basket was about 5% so far this year, making China’s exports less competitive; (3) The interbank liquidity squeeze in June had some impact on trade, especially on imports, though the impact might be more salient later; (4) The dollar strength. JPY has depreciated 24% against the USD since Oct 2012, and export to Japan is 7.4% of China’s total exports. This currency impact could lower China’s trade growth (which is denominated in USD) by 1% to 2%; (5) Chinese traders might unwind their fake trade in earlier months as the government tighten up its control on hot money inflow and arbitrage; (6) Last but certainly not the least, China’s Custom might intentionally deflate trade data in June to neutralize previous over-reporting so the government will eventually report clean data.

Note that the last 2 imply that the real numbers could be a bit stronger than reported.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.