China’s August exports unexpectedly shrink, imports remain weak

Many analysts expect China’s export growth to slow further in coming months. (AFP)
Updated 08 September 2019

China’s August exports unexpectedly shrink, imports remain weak

  • Beijing is widely expected to announce more support measures in coming weeks to avert the risk of a sharper economic slowdown
  • There were expectations that looming tariffs may have prompted some Chinese exporters to bring forward or ‘front-load’ US-bound shipments into August

BEIJING: China’s exports unexpectedly fell in August while imports shrank for a fourth month, pointing to further weakness in the world’s second-largest economy and underlining a pressing need for more stimulus as the Sino-US trade war escalates.
Beijing is widely expected to announce more support measures in coming weeks to avert the risk of a sharper economic slowdown as the United States ratchets up trade pressure, including the first cuts in some key lending rates in four years.
On Friday, the central bank cut banks’ reserve requirements for the seventh time since early 2018 to free up more funds for lending, days after a cabinet meeting signaled that more policy loosening may be imminent.
August exports fell 1 percent from a year earlier, the biggest fall since June, when it fell 1.3 percent, customs data showed on Sunday. Analysts had expected a 2.0 percent rise in a Reuters poll after July’s 3.3 percent gain.
That’s despite analyst expectations that looming tariffs may have prompted some Chinese exporters to bring forward or “front-load” US-bound shipments into August, a trend seen earlier in the trade dispute.
Many analysts expect export growth to slow further in coming months, as evidenced by worsening export orders in both official and private factory surveys. More US tariff measures will take effect on Oct. 1 and Dec. 15.
Sunday’s data also showed China’s imports shrank for the fourth consecutive month since April. Imports dropped 5.6 percent on-year in August, slightly less than an expected 6.0 percent fall and unchanged from July’s 5.6 percent decline.
Sluggish domestic demand was likely the main factor in the decline, along with softening global commodity prices. China’s domestic consumption and investment have remained weak despite more than a year of growth boosting measures.
China reported a trade surplus of $34.84 billion last month, compared with a $45.06 billion surplus in July. Analysts had forecast a surplus of $43 billion for August.
August saw dramatic escalations in the bitter year-long trade row, with Washington announcing 15 percent tariffs on a wide range of Chinese goods from Sept. 1. Beijing hit back with retaliatory levies, and let its yuan currency fall sharply to offset some of the tariff pressure.
China and the United States on Thursday agreed to hold high-level talks in early October in Washington, the first in-person discussions since a failed US-China trade meeting at the end of July.
But there was no indication that any planned tariffs on Chinese goods would be halted, and markets expect a lasting peace between the two countries seems more elusive than ever.
White House economic adviser Larry Kudlow said on Friday the United States wants “near term” results from US-China trade talks in September and October but cautioned that the trade conflict could take years to resolve.
China’s trade surplus with the United States stood at $26.95 billion in August, narrowing from July’s $27.97 billion.
It still reached $195.45 billion in the first eight months of 2019, highlighting continued imbalances which have been a core complaint of Trump’s in his administration’s negotiations with Beijing.


$8bn blow to Erdogan as investors flee Turkey

Updated 09 July 2020

$8bn blow to Erdogan as investors flee Turkey

  • Overseas holdings in Istanbul stock exchange are at lowest in 16 years

ANKARA: Foreign capital is flooding out of Turkey in a massive vote of no confidence in President Recep Tayyip Erdogan’s economic competence.
Overseas investors have withdrawn nearly $8 billion from Turkish stocks since January, according to Central Bank statistics, reducing foreign investment in the Istanbul stock exchange from $32.3 billion to $24.4 billion.
As recently as 2013, the figure was $82 billion, and foreign investors now own less than 50 percent of stocks for the first time in 16 years.
“Foreign investment has left Turkey for several reasons, both internal and external,” Win Thin, global head of currency strategy at Brown Brothers Harriman, told Arab News.
“Externally, investors fled riskier assets like emerging markets during the height of the coronavirus pandemic. Some of those flows are returning, but investors are being much more discerning and Turkey does not seem so attractive.”
In terms of internal factors, Thin said that Turkish policymakers had made it hard for foreign investors to transact in Turkey. “This includes real money clients, not just speculative.
“By implementing ad hoc measures to try and limit speculative activity, Turkey has made it hard for real money as well. Besides these problems, Turkey’s fundamentals remain poor compared to much of the emerging markets.”
Erdogan allies claim international players are manipulating the Istanbul stock exchange through automated trading, and have demanded action to make it difficult for them to trade in Turkish assets.
Goldman Sachs, JPMorgan, Merrill Lynch, Barclays and Credit Suisse were banned this month from short-selling stocks for up to three months, and this year local lenders were briefly banned by the banking regulator from trading in Turkish lira with Citigroup, BNP Paribas and UBS
JPMorgan was investigated by Turkish authorities last year after the bank published a report that advised its clients to short sell the Turkish lira.
MSCI, the provider of research-based indexes and analytics, warned last month that it may relegate Turkey from emerging market status to frontier-market status because of bans on short selling and stock lending.
With the market becoming less transparent, overseas fund managers, especially with short-term portfolios, are unenthusiastic about the Turkish market and are becoming more concerned about any forthcoming introduction of other liquidity restrictions.
The exodus of foreign capital is likely to undermine Turkey’s drive for economic growth, especially during the coronavirus pandemic when employment and investment levels have gone down, with the Turkish lira facing serious volatility.