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Can China’s Structural Shift Improve Its 2017 Economic Performance?

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Part 3
Can China’s Structural Shift Improve Its 2017 Economic Performance? PART 3 OF 9

Why China’s Trade Surplus Rose More Slowly in June 2017

Improved trade in China

Improved global (ACWI) economic growth has resulted in improved global trade, helping export-dependent economies’ (EWZ) (EWW) performances in 2017.

China (FXI) seems to be benefitting from improved trade, which has resulted in its rising trade surplus in 2017. It posted a $42.8 billion trade surplus in June 2017, slightly higher than the previous month’s surplus of $40.7 billion. However, the country’s trade surplus has fallen compared to the same period last year.

Why China’s Trade Surplus Rose More Slowly in June 2017

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China’s (MCHI) import growth is slowly exceeding its export growth, resulting in a lower trade surplus for June 2017, compared to the same period last year. 

The country’s import volumes and the prices of commodities (DBO) such as iron ore, crude oil, and natural gas rose in 1H17, compared to its export volumes in the same period last year. This difference has resulted in a faster rise in the value of its imports compared to its exports in 1H17.

Trade surplus in June 2017

China’s trade surplus in June 2017 remained slightly higher than the market’s expectation of a $42.4 billion surplus. However, it was lower compared to its $45.2 billion surplus in the same period last year. The country’s exports stood at $196.5 billion in June 2017, an 11.3% rise year-over-year (or YoY) and an 8.7% rise month-over-month. The country’s imports stood at $153.8 billion, a 17.2% rise YoY and a 14.8% rise month-over-month.

Expectations

China has seen a rise in foreign trade in 2017. This rise is likely to support its economic activity in 2017. According to China’s Ministry of Commerce, Chinese exports and imports are expected to improve in 2017. The country’s “Belt and Road” initiative, which aims to build connectivity between Europe (VGK) and Asia (AAXJ), is expected help its global (ACWI) trade in the future.

In 1H17, China’s foreign trade rose 19.6% YoY to reach 13.1 trillion Chinese yuan. China’s foreign trade volumes stood at 7.5 trillion yuan in 2H17, a rise of 20.5% YoY, mainly due to an improved structure of trade modes.

“Belt and road” initiative growth

China’s imports and exports to the European Union (EZU), the United States (SPY), and the Association of Southeast Asian Nations (ASEA) rose 17.4%, 21.3%, and 21.9%, respectively, in 1H17. Together, these regions account for ~41.4% of China’s total import and export value. The country’s imports and exports to Russia (ERUS), Pakistan, Poland, and Kazakhstan rose 33.1%, 14.5%, 24.6%, and 46.8%, respectively, in the same period.

Chinese (MCHI) trade makes up ~56% of total global foreign trade volumes, affecting domestic and international markets.

Let’s look at China’s 2017 exports in the next article.

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