Chinese data offers minimal clarity - Scotiabank

Analysts at Scotiabank explained that the Chinese trade data continues to offer minimal clarity on this key sector of the country’s economy but many of the media headlines are distorted in our view.

Key Quotes:

"July figures registered a 4.4% y/y drop in exports measured in USD terms but a 2.9% rise measured in local yuan terms, while imports were down 12.5% y/y in USD terms and -5.7% in yuan terms. With the yuan more than 7% lower versus the USD over the past year, currency depreciation has played a significant role both in terms of valuation effects and currency hedging tactics including invoicing effects. Further, price effects are highly distorting particularly on the commodity import side of the picture."

"A main reason why the value of imports is down in year-ago terms is what has happened to commodity prices and the lagged effects of market moves on contracts. For example, the value of oil imports fell by 23.7% y/y in July but the volume of crude oil imports is up 12.1% ytd."

"Therefore, it’s misleading to point to the headline figure for China’s imports as a gauge of how weak the domestic economy is when the headline figure is not adjusted for price movements. Or take copper, where import volumes are up 36.1% ytd and outstripping the 14.2% rise in the value of copper imports."