China’s Exports Plummet 17.2% in January-February Period

China’s Exports Plummet 17.2% in January-February Period
March 10, 2020

 

In the offshore market, the Chinese yuan lost 0.3% to trade at 6.9053 a dollar as data published by the country’s General Administration of Customs indicated a sharp decline in exports from January to February. As the country grapples with the COVID-19 virus (coronavirus disease), economists fear that a rebound is not anywhere near. After opening at 6.95170, the USD/CNY pair has dropped to a low of 6.94775 before reversing to reach a high of 6.95230.

China’s exports plummeted in the January-February period, primarily due to the negative impact of the coronavirus outbreak. So far, more than 3,000 people have lost their lives in the deadly coronavirus outbreak. Exports were also affected by the extended Lunar New Year holidays, which weighed on supply chains and general business activity. According to the statistical organization exports dropped 17.2% y-o-y in January and February to $292.4 billion. It is the most significant decline since February 2019 when the country’s trade relationship with the US worsened.

Notably, exports recorded a 7.9% y-o-y growth in December. Economists had anticipated a decline of 16.2%. Likewise, imports dropped 4% to $299.5 billion, a decrease from 16.5% increase in December. Economists had anticipated imports to decline by 16.1%.

Last month, the Chinese authorities stated that data for January and February would be combined.

As a result, the trade deficit reached $7.09 billion, compared with economists’ expectation for a surplus of $38.80 billion.

Exports to the US tumbled 27.7% in January and February to $43 billion, worsening from the 12.5% drop recorded in December. Imports from the US rose 2.5% to $17.6 billion. However, the country still recorded a $25.4 billion trade surplus with the US.

Iris Pang, an ING economist, opined that a sharp rebound is not anticipated. However, Pang expects medical supply exports from China will increase in March. “Though we do not expect a V-shape rebound in production and exports in March, we believe that China will not receive more donations from the rest of the world. Almost the opposite, we expect China to export some medical supplies to other countries that need help to fight the coronavirus.”

The economist further expects China to record trade surplus in March, despite recording a negative growth on a yearly basis. Economic data released last month indicated that the country’s manufacturing record hit a record low. Even non-manufacturing activity plunged.

Julian Evans-Pritchard, an analyst at Capital Economics’, indicated that combining the January and February data implies that the “published growth rate won’t fully reflect the extent of the recent weakness.”

Xu Xiaochun, an economist at Moody’s Analytics, opined that the slowdown would probably continue into March as well.

“High-frequency data such as coal and energy consumption, as well as metro usage, suggest that workers are still slowly returning to work.”  

Xu stated that outbreaks in other parts of the world (Europe and South Korea) would also hamper China’s exports as demand will remain sluggish.

Technically, the USD/CNY pair has found support at 6.9478. The next minor resistance is anticipated only near 6.9600. Therefore, we are expecting the yuan to weaken further against the greenback.

cny - technical analysis - 10th March 2020

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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