Chinese exports, imports shrink less than expected in August

Investing.com-- Chinese imports and exports shrank less than expected in August, improving slightly after a sharp decline through the first seven months of the year, although sluggish local and international demand still presented more headwinds to trade. 

China’s exports fell 8.8% in August from the prior year, data from the Customs Administration showed on Thursday. The reading was better than expectations for a decline of 9.8%, and showed much improvement from a 14.5% drop in the prior month.

The improved exports were driven by some improvement in local manufacturing, which in turn saw more overseas orders being met. But recent purchasing managers’ index data also showed that overseas demand for Chinese goods was weakening, which is expected to keep exports largely depressed. 

Imports fell 7.3% against expectations for a drop of 8.8%, also improving from the 12.4% slide seen in July. While the reading indicated some uptick in local demand, overall imports still remained largely depressed for the year to date. 

The smaller drop in imports also saw China’s trade surplus shrink more than expected to $68.36 billion in August from $80.60 billion in the prior month. The reading also largely missed expectations for a surplus of 78.0 billion, and was at its weakest level in two months.

Both exports and imports improved after shrinking at their fastest pace since the 2020 COVID-19 pandemic in July. But while overall international trade showed some signs of improvement, it still remained largely down for the year, weighed by worsening economic conditions in China, as well as its biggest export destinations.

Recent weakness in the yuan also aided Chinese exporters, although they still face fresh headwinds from softening global demand. China has also shown reluctance towards allowing the yuan to depreciate further.

Local demand in China is also expected to remain weak in the coming months, as business activity slows and as the country’s property sector grapples with a growing debt crisis.