China believes export growth is about to return

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While Chinese exports have contracted 8.3% in the 12 months to July, they are likely to recover soon, according to a report in China’s state-run newspaper the People’s Daily.

“China’s exports will hopefully return to positive territory this year as the latest monthly slump was partly caused by base effect,” said Zhang Ji, assistant to the minister for commerce.

Zhang attributed July’s plunge to “exceptionally high” growth in the same period last year, saying the decline would have been within a normal range if the base effect was excluded, according to the report.

In July 2014, exports surged 14.5% from a year ago, it noted.

Zhang suggested that China’s share of global trade was continuing to expand despite weak external demand and rising costs.

“The export structure is improving and the country’s share in the global market is steadily expanding — these trends have not been changed,” Zhang said.

“Though softening due to weaker external demand and rising costs, China’s exports still outperformed other major economies.”

On the yuan — the topic of much debate in financial markets this week after the PBOC’s decision on Tuesday to allow the currency to weaken in line with market forces — Zhang admitted that trade-oriented sectors were “generally having a hard time” but stopped short of blaming recent strength in the yuan as a factor behind the weakness.

Instead of suggesting a weaker currency would help overcome this, Zhang offered another potential solution.

The MOC will continue to improve services and regulation to support trade firms, and study new policies to support trade growth, he said.

While a weaker yuan was not specifically mentioned as one such policy, you can bet many — particularly those nations and firms directly competing against China for their share of global demand — believe it certainly is.

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