Export growth is under pressure
Industry insiders expect that the export growth rate will continue to decline slightly in the next few months, the import growth rate may relapse, and the overall foreign trade will still show a weak trend.
Xu Gao, chief economist of Everbright Securities, believes that external demand is expected to remain stable in the next few months as expectations of interest rate hikes by the Federal Reserve weaken and the risk of an external economic slowdown decreases. The effective exchange rate of the RMB remains stable. The stable exchange rate will promote the overall stability of exports, and export growth will continue to decline slightly in the next few months.
Liu Tao, a senior researcher at the Bank of Communications Financial Research Center, said that export growth in the third quarter may face greater pressure. The leading indicators of foreign trade are not optimistic. China's foreign trade export leading index in May was 33.1, down 0.7 from the previous month. There is still great uncertainty in the recovery prospects of the world's major economies. In particular, the recent US employment data has been significantly lower than market expectations, and China's foreign demand environment has not fundamentally improved.
Liu Tao said that the Ministry of Commerce’s recent survey of 20 provinces and cities across the country showed that companies generally reported that the foreign trade situation this year was generally better than last year. It is becoming more complex and severe, and the difficulties are tending to intensify. Judging from the monthly export situation last year, exports from June to December last year basically remained between 189.5 and 223 billion US dollars. The higher base makes it difficult to achieve positive year-on-year growth in the third quarter of this year and beyond.
As for imports, Liu Tao said that the import growth rate in the third quarter may recur. Judging from the recent lower-than-expected U.S. core PCE price index and non-farm employment, it is difficult to reach the bottom line of interest rate hikes set by the Federal Reserve in the short term. Affected by the weaker-than-expected U.S. economy, international commodity prices, including crude oil, may undergo periodic corrections, and the quantity of China's imported commodities may fluctuate with changes in domestic investment demand, inventory space, etc.
Xie Yaxuan, head of macro research analyst at China Merchants Securities, said that imports will continue to be constrained by demand in the second half of the year. Domestic demand may remain weak in the second half of the year, but if commodity prices remain above current prices, the year-on-year impact will be beneficial to import growth. . Since China mainly imports commodities and exports less, the stabilization and rebound of global commodity prices may make China's foreign trade surplus this year slightly smaller than last year.
The "2016 China Economic Prospects Analysis" report recently released by the Chinese Academy of Social Sciences believes that the decline in China's imports may narrow this year, and the annual import growth rate is expected to drop by 5% to 7%.
The impact of Brexit may be transmitted
Industry insiders believe that exports will face increased pressure in the second half of the year. On the one hand, the Federal Reserve may raise interest rates in the second half of the year, and the U.S. dollar index will fluctuate on the strong side. In order to prevent financial risks, the RMB exchange rate against the US dollar will be managed to maintain a stable range in the second half of the year, causing the RMB to appreciate against other currencies and adding downward pressure on exports. On the other hand, the EU is China's largest trading partner. If the UK eventually leaves the EU, it will give China Foreign trade brings greater uncertainty. According to statistics from the Ministry of Commerce, last year the EU became China's largest trading partner for the 11th consecutive year, and China became the EU's second largest trading partner for the 12th consecutive year.
Liu Dongliang, senior analyst at the Asset Management Department of China Merchants Bank, believes that if Brexit leads to a new round of recession or pessimistic expectations in the EU, the impact will be transmitted to China through the trade and investment chain. The EU is China's largest trading partner, and China's foreign trade has been particularly affected, thereby increasing downward pressure on the economy.
Zhang Jianping, director of the International Cooperation Office of the Institute of Foreign Economics of the National Development and Reform Commission, believes that due to the close connection between China's economy and the global economy, Brexit has caused the pound and euro exchange rates to plummet, global capital markets have fluctuated violently, and the economies of the United Kingdom and the European Union are facing recession, which will affect the demand for Chinese products in the British and even European markets.
In addition, the rise of trade protectionism this year has added resistance to China’s exports. Xie Yaxuan said that as global trade continues to be sluggish, the rise in trade protectionism in developed countries may suppress China's exports to developed countries. Since the beginning of this year, Europe, the United States, and Japan have launched anti-dumping measures against Chinese steel, which highlights that in the context of sluggish global demand, the concept of free trade has weakened, and trade protectionism has obviously heated up. China's exports to developed countries may not see a significant increase in the short term. The economic improvement of resource countries and the promotion of foreign direct investment may be important supporting factors for my country's exports in the second half of the year.
Momentum and pressure coexist
Although the pressure has not diminished, overall, exports in the second half of the year still have certain momentum to support them.
Xie Yaxuan said that exports in the second half of the year will have both resistance and motivation. “One Belt, One Road” is expected to gradually Become an important factor supporting exports. The “Belt and Road Initiative” has opened two channels for China’s exports. First, investment and construction in border countries have expanded domestic demand and created channel advantages for Chinese companies to provide the equipment, raw materials, products, etc. they need. Second, after the establishment of economic cooperation, countries along the border have opened up space for China’s future export of consumer goods and labor-intensive products.
Xie Yaxuan said that from another perspective, in recent years, my country's non-financial foreign direct investment has indeed shown a leading and driving role in exports, which also confirms the "Belt and Road Initiative" in promoting exports. Since the beginning of this year, China's overseas investment has seen significant growth. From January to May, it achieved a total of US$73.52 billion in overseas investment, a year-on-year increase of 61.9%. It is expected to promote export improvement in the second half of the year.
The free trade zone’s driving role in China’s exports is also increasingly obvious. Taking the China-South Korea Free Trade Zone as an example, the signing and implementation of the China-South Korea Free Trade Agreement will greatly promote the economic and trade development between China and South Korea. Bilateral exchanges have played a positive role. According to survey statistics from the Ministry of Commerce, 50% of the companies surveyed said that exports to South Korea have increased or increased significantly after the agreement came into effect; 57% of the companies surveyed reported that the number of inquiries or orders has increased or increased significantly.
Shen Danyang, spokesperson of the Ministry of Commerce, said recently that in the face of multiple adverse impacts, the signing of the China-South Korea Free Trade Agreement has resulted in a small decline in the scale of bilateral trade between China and South Korea this year. The Ministry of Commerce is optimistic about the further growth of China-South Korea trade in the second half of the year.
Chi Fulin, president of the China (Hainan) Reform and Development Institute and vice president of the China Economic System Reform Research Association, suggested that China should use the "Belt and Road" as a carrier to launch a new round of free trade area construction and oppose trade protectionism. It is recommended to establish multilateral, bilateral, regional, and global free trade zones along the “One Belt and One Road” initiative. It is also possible to establish an energy economic circle with certain Central European countries and a tourism economic circle with Eurasian countries.
ANNA