Last night, Chinese trade data came in weaker than expect. Both import and export numbers missed.
In a now, Nomura’s Zhiwei Zhang says the miss raises the risk of a growth miss for China, and notes that there’s a big meeting coming up next week.
China‟s import growth contracted by 0.7%, also weaker than market expectations (Consensus: 6.0%, Nomura: 8.0%). Import growth for processing and re-export purposes fell further to -7.0% y-o-y in June, from -3.2% in May. Import growth of commodities rebounded to -5.2% in June from -14.5%. In volume terms, import growth of iron ore dropped to 6.9% from 7.4%, while that for crude oil and copper rose to 2.0% and 9.7%, respectively, from -6.0% and -14.6%. Import growth for domestic consumption (ex commodities) fell to 8.0% in June from 15.2% in May. The trade balance rose to US$ 27.1bn in June from US$ 20.4bn in May.
The weak trade data pose further downside risks to the June and Q2 growth numbers due for release on 15 July and help reinforce our concern over risks in H2. The government will likely hold a meeting early next week to set its policy stance for H2, which is critical for the growth outlook. So far, it has sent consistent signals that the policy stance will remain tight to contain financial risks. As macro data weaken further, next week will be a testing time for the government in revealing just how much of a growth slowdown it is willing to tolerate.
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