Predicting China’s rebound can feel a bit like waiting for Godot – it just doesn’t come. Each new piece of data seems to confirm things getting ever-so-slightly worse rather than remotely better.
August trade data fits into that picture, with exports remaining tepid and imports, to most analysts’ surprise, falling into negative territory.
The raw numbers largely speak for themselves: exports rose 2.7 per cent (more or less expected), imports contracted 2.6 per cent (a bit of a shock). Li Huiyong of Shenyin and Wanguo Securities told Reuters the figures were “terrible”.
And there is little in the numbers to offer immediate hope. Import growth for domestic consumption went negative in August too, “which suggests domestic demand weakened significantly”, according to Zhang Zhiwei at Nomura. Imports for processing (i.e. future exports) were down 1.5 per cent too.
Citi analysts believe China may need to step in and help exporters.
We do not think the government would resort to currency depreciation since China’s trade surplus is still sizable, and economic fundamentals, political reality, and RMB internationalization agenda, would argue against depreciation.
Tax rebates may instead offer some limited relief.
But what this, and other data points released over the weekend, really add up to is a growing sense that Q3 will mark another quarter of weakening growth, and that any rebound won’t come until Q4 at the earliest. Remember: most analysts thought Q2 was the bottom.
Sure enough, Barclays decided on Monday to slash its growth forecasts for both 2012 and 2013. The bank now expects 7.5 per cent growth this year (from 7.9 per cent before today), and 7.6 per cent in 2013 (from 8.4 per cent).
RBS is in the same territory:
As confirmed by the August data just released, China’s economy has slowed down due to weak exports and a policy-induced slowdown in real estate, with declining profitability aggravating sentiment among corporates and markets. Looking ahead, we continue to project solid (7.5-8%) growth this year and next – but no rapid recovery
Welcome to the new normal?