1 Dec 2016
China Trade Quarterly (Dec 2016)
Retail sales of consumer goods reached 26,960.1 billion yuan in January to October 2016, up nominally by 10.3% yoy. Online retail sales of goods, which accounted for 11.8% of total retail sales, surged by 24.9% yoy in the period.
Ex-factory prices of industrial products have been rising. The producer price index of industrial products went up by 0.7% mom in October, posting month-on-month gain for four consecutive months.
Both rural and urban households saw high single-digit income growth in 1-3Q16: the per capita disposable income of rural households increased nominally by 8.4% yoy to reach 8,998 yuan; while that of urban households rose by 7.8% yoy in nominal terms to reach 25,337 yuan.
China adjusted consumption tax on cosmetic products on 1 October. The consumption tax rates for high-end cosmetic products were reduced to 15%, while the consumption tax on general cosmetic products was abolished on 1 October. The change in tax policy would provide more room for retailers to lower prices of cosmetic products.
Growth in fixed asset investment fell to 8.3% yoy in January to October 2016, due mainly to the deceleration in growth in FAI in the secondary industry.
China will introduce reform in allocation of spending responsibilities among central and local governments. On 24 August, the State Council released the ‘Guiding Opinions on the Reform in Dividing Fiscal Duties and Spending Responsibilities among the Central and the Local Governments’. The reform includes clarifying the spending responsibilities among the central and the local governments as well as assigning more fiscal duties to the central government.
Confidence among Chinese entrepreneurs in the secondary industry has continued to improve. China’s Entrepreneur Confidence Index for the secondary industry came in at 111.4 in 3Q16, posting quarter-on-quarter gain for two consecutive quarters.
Both exports and imports posted year-on-year drop in October. Exports and imports were down by 7.3% yoy and 1.4% yoy respectively in the month.
Exports to the US, the EU, the ASEAN, Japan and Brazil dropped by 4.3% yoy, 7.8% yoy, 5.5% yoy, 7.8% yoy and 28.3% yoy respectively in 1-3Q16. In contrast, China’s exports to Russia and India managed to record positive growth of 7.1% yoy and 1.3% yoy respectively in the same period.
All top six provinces/ municipalities in terms of exports witnessed negative year-on-year growth in exports in 1-3Q16. Among these provinces and municipalities, Shanghai saw the sharpest fall in exports (minus 8.6% yoy) in 1-3Q16.
FDI grew by 4.2% yoy to reach 609.0 billion yuan in 1-3Q16. The share of the service sector in the total FDI went up to 70.7% in 1-3Q16 from 61.1% in 2015. Among industries, FDI in the ‘transportation, storage and postal industry’, the ‘information transmission, computer services and software industry’ and the ‘leasing and business services industry’ posted rapid growth of 92.0% yoy, 166.7% yoy and 73.8% yoy respectively in 1-3Q16.
Foreign exchange reserves have fallen at a faster pace. After dropping by US$ 7.4 billion in 2Q16, China’s foreign exchange reserves went down by US$ 38.8 billion in 3Q16, and then fell by US$ 45.7 billion in October.
Depreciation of the Chinese yuan against the US dollar has quickened since early November. So far this year, the Chinese yuan has depreciated by 5.8% against the US dollar (as of 18 November).
China would take a lead role in Asia-Pacific trade liberalization, if the US turns towards protectionism. China has been pushing for the RCEP and the FTAPP. On 19 November, Chinese President Xi Jinping delivered a keynote speech at the APEC CEO Summit, calling for trade and economic cooperation and urging regional leaders to advance trade deals. In contrast, given Trump’s protectionist stance, it is widely expected that the US government will tear up the TPP, and renegotiate or even withdraw from the NAFTA.
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