China reported weaker trade data for the first time in 17 months. Exports and imports both declined in June. Exports fell by 3.1 percent and imports contracted by 0.7 percent, customs data showed.
Diagnosis of June's weak trade numbers
One reason for the weak numbers is the fragile global economy. Although the U.S. is among a number of countries to be claiming indications of an economic recovery, they still have a long way to go. In such circumstances, it is not surprising to see weak export data.
Conversely, in the first quarter foreign trade showed unexpectedly good data, with exports rising by 18.4 percent, so despite the losses in May and June, China remains in positive growth of 8.6 percent.
To some extent there was an exaggerated export performance, with arbitrage on the Renmenbi and export duty refunds as the factors leading the deceptive boom. Behind it, Chinese banks were responsible for a certain amount of manipulation of foreign trade.
Among artificial exports, cargos were allowed to travel several times between domestic ports and overseas destinations without barriers, as a result of commercial bank offering unrestricted open letters of credit. At present there are no limits and no proper supervision on open letters of credit either from China’s central bank or its banking laws.
Spokesman for the customs bureau Zheng Yuesheng explained that some administrative departments have now adopted supervisory measures on banks, and custom agencies have also strengthened their monitoring. Arbitrage trade to Hong Kong has been curbed and trade between the mainland and Hong Kong has dropped sharply, which has dragged down the performance of China’s trade data.
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