China Trade Data Disappoints (Again) Despite Plunging Yuan

Chinese imports have now declined for 23 of the last 24 months (falling 1.4% YoY in USD terms) and for 18 of the last 20 months, despite a devaluing yuan, exports have declined YoY (-7.3% YoY in October). In both USD and Yuan terms, trade data disappointed across the board suggesting a global economy that is far from as exuberant as recent PMIs suggest.


As Bloomberg notes, a depreciation of about 9 percent in the yuan since August 2015 has cushioned the blow from tepid global demand, but failed to provide any sustained boost to shipments. Rising input costs and surging wages bills have flattened profit margins for exporters to the point where many can no longer discount and are mulling price increases, according to interviews at the Canton Fair last month.

"We expect export growth to remain sluggish over the coming quarters due to a weak global economic environment and rising costs for Chinese goods," BMI Research wrote in a report ahead of the data release. "The slow growth in the global economy will continue to be the major factor weighing on China’s export sector over the coming quarters."

But what may be most concerning, especially to oil bulls, is that it appears China's oil SPR is getting full as China - the world's second largest oil consumer - imported only 28.79m tons of crude last month, the lowest since January, according to the General Administration of Customs, equivalent to 6.81mmbpd. The October drop was 12.9% m/m, a huge drop and a big concern for OPEC which is suddenly seeing demand melt before its eyes.

Some other statistics:

  • Oil product imports at 1.76m tons; exports at 4.07m tons
  • Coal imports at 21.58m tons, lowest since July
  • Natural gas imports at at 3.82m tons

In short, China's trade - aside from the recent burst in coal imports - is once again slowing down rapidly, and what makes it worse is that this is taking place shortly after another massive credit impulse and near-record fiscal stimulus was created to stimulate the economy.


If China's domestic economic weakness once again spills over to the rest of the world as it did in 2015, then good bye Fedrate hike plans.