China’s soft imports in June were led by factors that included weak domestic demand and U.S. control over high-tech exports, in spite of lower base effects. Slow rebound in domestic investment momentum has led to weak imports of important commodities, except for oil, whose import volume rose 15.2 percent year-on-year in June.
The import values of coal and copper shrank 1.5 percent year-on-year and 34.4 percent year-on-year, respectively in the month. Iron ore imports rose sharply 34.6 percent year-on-year in value, owing to sharp rise in prices while their volume dropped 9.7 percent year-on-year in June, marking the second largest contraction in 12 months.
U.S. restrictions over high-tech exports to China led to a 31.4 percent year-on-year drop in China’s imports from the U.S. in June, the most rapid rate of fall in the past five months. In all, China’s high tech imports dropped 6 percent year-on-year in June, marking the eighth straight months of fall.
A continuous fall in Chinese exports to the U.S. has been partly countered by its exports to other markets, including ASEAN economies. Chinese exports to the U.S. dropped 7.7 percent year-on-year in June, after additional tariffs implemented in May. Nevertheless, Chinese exports to ASEAN economies rose 12.9 percent year-on-year in the same month, partly countering the loss.
Chinese trade balance is not expected to rebound in the second half of this year, inflicting a continuous blow to its growth outlook in the second half of 2019, said ANZ. Imports in China might rise moderately in the months ahead as the U.S. has announced its intention to ease controls over high-tech exports to China as long as there is no national security concern.
“This may help lift China’s imports in H2 to some extent, on top of moderate demand from domestic investment. However, China’s exports may not improve significantly as the existing US tariffs are unlikely to be removed soon. Both these factors will bode ill for China’s external balance, providing little support to GDP growth in the second half of the year”, added ANZ.
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