Chinese trade is facing a challenging start to 2016 with both exports and imports experiencing steeper-than-expected falls in January – indicating weak demand both at home and abroad.

Exports fell 11.2

per cent in January from a year ago in US dollar terms – steeper than the 1.4 per cent drop recorded in December, the General Administration of Customs said on Monday.

READ MORE: China’s export figures stronger than expected in December amid fears over nation’s slowing economy

Imports slumped by 18.8 per cent in dollar terms – accelerating from a decline of 7.6 per cent in December.

***However, the mainland’s imports from Hong Kong reported a surge of 108.1 per cent in January, raising suspicion among analysts about over-invoicing activities to disguise possible capital outflow, especially amid hefty expectations of the yuan’s depreciation.

***“The trade data against the Hong Kong is often distorted, but a single month data, especially around the Chinese New Year, is not robust enough and we’d better wait for February’s data as well as HK’s calibration of its purchase from and shipment to the mainland for a better judgement,” said Frank Tang, an economist with North Square Blue Oak, a London-based investment bank.

***The weaker-than-expected export growth but a more disappointing import figure resulted in the trade surplus to climb to a record high of US$63.3 billion in January.

***“Together, we believe the downbeat trade results in January reflect the adverse global and domestic economic environment. We expect the situation to remain unchanged in the near future, and that external trade will again be a laggard to growth in 2016,” said Mizuho Securities in a research note.

***Exports to the United States, the European Union and Japan continued to slow down. Even worse, exports to emerging markets were also under challenge, as many of them are also under downward pressure in broad economy.

***Data showed exports to Brazil dropped 44.4 per cent last month, shipment to South Africa fell 35 per cent, followed by a drop of 18.0 to the Association of Southeast Asian Nations.

***“Given the dimmer global economic outlook, China’s export growth is likely to remain constrained by lackluster external demand. Meanwhile, low investment demand as over-capacity reduction progresses will weigh on import growth amid lower commodity prices,” said Merrill Lynch Bank of America.

***“We expect macro policies to remain supportive against countercyclical headwinds. That said, the wide trade surplus still leaves the central bank with limited room to conduct monetary easing through currency depreciation, as Governor Zhou reckoned during an interview with Caixin magazine over the weekend,” it said.

***Though the weaker data raised calls for further loosening monetary policy but the effects would be in question given the low incentive of investment in the real economy.

***Zhou Xiaochuan, chief of the People’s Bank of China, said there is no basis for the yuan to continue deprecating as China’s capital movements are within reasonable range and international payment remains sound.

***He said China will remain a stable yuan against a basket of currencies and said the government did not have the motive to weaken the yuan to boost the exports.

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