China continues to underperform
Markets Forex

2 Likes 0 Dislike 2 Replies
1 year ago

The Chinese economy, which has been going through a slowdown, continues to present disappointing figures. Latest trade figures indicate that in July, exports from China declined by 4.4% year on year while its imports declined 12.5%. China's exports for July 2016 stood at $184.7 billion while its imports stood at $132.4 billion, resulting in a trade surplus of $52.31 billion.

During this period, China's foreign exchange reserves declined by $4.1 billion - at the end of July '16, China's forex reserves stood at $3.2 trillion. Chinese reserves had increased by $13.4 billion during June 2016. Earlier, in May 2016, Chinese forex reserves had dropped to their lowest level in 5 years.

China's inflation rate also declined during this period - the Chinese Consumer Price Index increased by 1.8% year on year during July 2016, far below the 3% target level set by the government. (For comparison, during June 2016, the Chinese Consumer Price Index had grown by 1.9%.)

Chinese trade figures are generally considered quite significant as they reflect the global demand, which in turn acts as an indicator of global economic growth. Thus, the current figures indicate lower demand in the rest of the world, which mirrors the difficult economic conditions prevalent in many major economies. 

  


Posted 1 year ago 2 Likes   0 Dislikes

Even though China is growing at a smaller rate today, it is still one of the fastest growing major economies of the world. For the last two quarters, it has grown at an annual rate of around 6.7%, which is still pretty impressive. (Of course, this rate is lower than the 9.82% year on year average growth rate during the period from 1989 to 2016. Still, it is far better than the 1% to 1.5% maximum growth rate typically seen in developed nations. )



Posted 1 year ago 1 Likes   0 Dislikes

China's economy is definitely growing at a much slower pace these days. However, the Chinese government does not seem keen on applying large expansionary measures to try and boost the economy. Official statements from China indicate that the government is more interested in ensuring that there is no bubble in their manufacturing and construction sectors. In such a situation, it is likely that Chinese economic growth will remain slow for at least the short to medium term. Consequently, lower Chinese imports (so lower demand for goods from some developed countries) and low crude oil prices may continue for some time.