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China's export and import figures in July fell more than expected, as can be seen from data revealed by China's General Administration of Customs Control on Monday. Imports to China decreased by 12.5% compared with the data for last year, which was the largest decline since February. According to The Wall Street Journal, analysts interviewed by the publication expected an average 3.6%-decrease in July’s value of imports. "I think the fall in imports was mainly due to the demand", - said HSBC economist Xiaoping Ma in Beijing. He noted that the government's attempts to reduce excess capacity could further hit the demand during the next few quarters. According to The Wall Street Journal, analysts interviewed by the publication on average expected decrease in July’s value of imports by 3.6%.
The country’s export countries in July also fell by 4.4% yoy against expected 8.9%. Exports to the US, the largest market in China, sank 2.0% in July, and supply to the European Union, which is the second largest market for the country, decreased by 3.2%. As reported by China's General Administration of Customs, pressure on supply may begin to soften in October. China's trade surplus last month rose to $ 52.31 billion, while expected average was $ 48 billion from $ 48.11 billion in June. At the same time, China's exports in RMB accelerated its growth in July to 2.9% from June's 1.3%, and imports in RMB fell by 5.7% after falling 2.3% in June. The trade balance surplus rose to 342.76 billion RMB from 311.2 billion RMB the previous month.
The Chinese economy is moving away from the investment model of growth. Yield on capital investment, particularly in raw materials and construction, is falling, yet consumer goods demand is growing. However, imbalances accumulated over the years of rapid growth, in particular dominant position of banks in investment financing and high debt load, may well result in a sharp slowdown in GDP growth. China needs reforms aimed at increasing competition and productivity growth, say McKinsey analysts.
Investment growth has led to significant distortions in the Chinese economy. For example, the financial sector is now generating 80% of economic profit. For comparison, the share is less than 10% in the US. In the black are mainly banks, insurers, developers and car manufacturers and Internet services. In the minus are firstly construction, oil and gas, metals and mining. In total, the calculations take into account 3.5 thousand large public companies, assets of which are equivalent to 55% of GDP. "Banks dominate in financing investments, but now that the difference between deposit and lending rates is reduced due to the liberalization of regulation, the profit of banks will also be reduced," - says the study.
source: wsj.com
The country’s export countries in July also fell by 4.4% yoy against expected 8.9%. Exports to the US, the largest market in China, sank 2.0% in July, and supply to the European Union, which is the second largest market for the country, decreased by 3.2%. As reported by China's General Administration of Customs, pressure on supply may begin to soften in October. China's trade surplus last month rose to $ 52.31 billion, while expected average was $ 48 billion from $ 48.11 billion in June. At the same time, China's exports in RMB accelerated its growth in July to 2.9% from June's 1.3%, and imports in RMB fell by 5.7% after falling 2.3% in June. The trade balance surplus rose to 342.76 billion RMB from 311.2 billion RMB the previous month.
The Chinese economy is moving away from the investment model of growth. Yield on capital investment, particularly in raw materials and construction, is falling, yet consumer goods demand is growing. However, imbalances accumulated over the years of rapid growth, in particular dominant position of banks in investment financing and high debt load, may well result in a sharp slowdown in GDP growth. China needs reforms aimed at increasing competition and productivity growth, say McKinsey analysts.
Investment growth has led to significant distortions in the Chinese economy. For example, the financial sector is now generating 80% of economic profit. For comparison, the share is less than 10% in the US. In the black are mainly banks, insurers, developers and car manufacturers and Internet services. In the minus are firstly construction, oil and gas, metals and mining. In total, the calculations take into account 3.5 thousand large public companies, assets of which are equivalent to 55% of GDP. "Banks dominate in financing investments, but now that the difference between deposit and lending rates is reduced due to the liberalization of regulation, the profit of banks will also be reduced," - says the study.
source: wsj.com