Abstract The pressure and uncertainty of China's foreign trade in the second half of the year increased. Although the Fed has postponed interest rate hikes, it may still be in the second half of the year. The exchange rate of the RMB against the US dollar may remain stable, thus appreciating against other currencies, adding downward pressure on exports. The Brexit event will be given to the world...
The pressure and uncertainty factors facing China's foreign trade increased in the second half of the year. Although the Fed has postponed interest rate hikes, it may still be in the second half of the year. The exchange rate of the RMB against the US dollar may remain stable, thus appreciating against other currencies, adding downward pressure on exports. The Brexit incident will have a certain impact on the world economy, making China's external demand facing greater uncertainty in the second half of the year. Analysts believe that under the above background, the improvement of the economy of the resource countries and the promotion of foreign direct investment may be important supporting factors for China's exports in the second half of the year. The “Belt and Road†and free trade zone construction will also provide impetus for exports. Export growth pressure
The industry expects that the export growth rate will continue to decline slightly in the next few months, the import growth rate may be repeated, and the overall foreign trade is still weak.
Xu Gao, chief economist at Everbright Securities, believes that external demand is expected to remain stable in the coming months as the Fed’s interest rate hike expectations weaken and the external economic slowdown risks fall. The effective exchange rate of the renminbi will remain stable, and the stable exchange rate will promote the overall stability of exports. The export growth rate 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 the export growth rate in the third quarter may face greater pressure. The foreign trade leading indicators are not optimistic. In May, China’s foreign trade export leading index was 33.1, down 0.7 from last month. There are still large uncertainties in the recovery prospects of major global economies. In particular, the recent US employment data is significantly lower than market expectations. There is no fundamental improvement in the foreign demand environment.
Liu Tao said that the recent investigations by the Ministry of Commerce on 20 provinces and cities across the country show that enterprises generally reflect that the foreign trade situation this year is generally more complicated and severe than last year, and the difficulties are intensifying. Judging from the monthly export situation last year, the export in June-December last year was basically maintained at between $1895 and $22 billion. The higher base made it difficult to achieve positive growth in the third quarter of this year and beyond.
Regarding imports, Liu Tao said that the growth rate of imports in the third quarter may be repeated. From the recent lower-than-expected US core PCE price index and non-agricultural employment, it is difficult to reach the bottom line set by the Fed in the short term. Affected by the expected impact of the US economy, international commodity prices, including crude oil, may be phased back. The number of Chinese imports may fluctuate with changes in domestic investment demand and inventory space.
Xie Yaxuan, an analyst at China Merchants Securities Macro Research, 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, they will benefit import growth in terms of year-on-year impact. Since China's imports of bulk commodities are the mainstay and exports are small, the stabilization and rebound of global commodity prices may make China's foreign trade surplus this year slightly smaller than last year.
According to the "2016 China Economic Outlook Analysis" released by the Chinese Academy of Social Sciences, the decline in China's imports may narrow this year, and the annual import growth rate is expected to fall by 5%-7%.
Brexit influence or conduction
The industry believes that the pressure on exports in the second half of the year will increase. On the one hand, the Fed may raise interest rates in the second half of the year, and the US dollar index will be more volatile. In view of the prevention of financial risks, the exchange rate of RMB against the US dollar will be managed to maintain a stable range in the second half of the year, leading to the appreciation of the RMB against other currencies and increasing downward pressure on exports. On the other hand, the EU is China's largest trading partner. If the UK finally withdraws from the EU, it will bring greater uncertainty to China's foreign trade. According to the statistics of the Ministry of Commerce, last year, the EU became China's largest trading partner for the 11th consecutive year. China has become the EU's second largest trading partner for 12 consecutive years.
Liu Dongliang, senior analyst of China Merchants Bank's asset management department, believes that if the Brexit leads to a new round of recession or pessimistic expectations in the EU, its impact will be transmitted to China through trade and investment chains. The EU is China's largest trading partner, and China's foreign trade is particularly affected, thus increasing the downward pressure on the economy.
Zhang Jianping, director of the International Cooperation Office of the Institute of Foreign Economic Research of the National Development and Reform Commission, believes that due to the close relationship between the Chinese economy and the global economy, the withdrawal of the European Union caused the pound and the euro to fall sharply, the global capital market fluctuated wildly, and the economy of the UK and the EU faced a recession, which would affect the UK. And even the European market demand for Chinese products.
In addition, the rise of trade protectionism has increased resistance to Chinese exports this year. Xie Yaxuan said that in the context of continued global economic downturn, the rise of 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 on China's steel, highlighting the weakening of the concept of free trade in the context of sluggish global demand, and the protection of trade protection has obviously warmed up. China's exports to developed countries may not be significantly improved in the short term. The improvement of the economy of the resource countries and the promotion of foreign direct investment may be important supporting factors for China's exports in the second half of the year.
Power and pressure coexist
Although the pressure is not reduced, on the whole, exports will still have some momentum support in the second half of the year.
Xie Yaxuan said that exports will have both resistance and momentum in the second half of the year. The “Belt and Road†is expected to gradually become an important factor supporting exports. “One Belt and One Road†opened two channels for China's exports. First, it expanded its domestic demand for investment and construction in border countries, and created channel advantages for Chinese enterprises to provide the equipment, raw materials and products they needed. Second, After the establishment of economic cooperation, countries along the route have opened up space for the output of China's future consumer goods and labor-intensive products.
Xie Yaxuan said that from another perspective, in recent years, China's non-financial foreign direct investment has indeed shown a leading and leading role in exports, and it has also proved that the “Belt and Road†drive to exports. Since the beginning of this year, China's foreign investment has seen a relatively obvious growth. From January to May, the cumulative foreign investment reached 73.52 billion US dollars, an increase of 61.9% year-on-year. It is expected to promote export improvement in the second half of the year.
The role of the free trade zone in exporting to China is also becoming increasingly evident. Taking the China-South Korea Free Trade Area as an example, the signing and implementation of the China-South Korea Free Trade Agreement has played a positive role in promoting bilateral trade between China and South Korea. According to the statistics of the Ministry of Commerce, 50% of the respondents indicated that exports to Korea have increased or increased substantially since the agreement came into effect; 57% of respondents reported an increase or a large increase in the volume of consultations or orders.
Shen Danyang, spokesman of the Ministry of Commerce, said recently that in the face of multiple adverse effects, the signing of the China-South Korea FTA has led to 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 Sino-Korea trade in the second half of the year.
Chi Fulin, dean of the China (Hainan) Reform and Development Research 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 zone construction and oppose trade protectionism. It is recommended to establish multilateral, bilateral, regional and global free trade zones along the “Belt and Roadâ€, and also establish energy economic circles with certain Central European countries and build tourism economic circles with Asian and European countries.
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