CHINESE exports fell 8.3 per cent in July and imports dropped 8.1 per cent, according to the data from the General Administration of Customs, Reuters reported.
This news was soon eclipsed by a sudden 1.9 per cent drop in value of the Chinese Yuan causing widespread consternation in worldwide market.
It was the biggest one-day change since 1993, reported London's Financial Times. The fall, which pushed the currency's value from RMB6.1162 against the dollar the day before to RMB6.2298, was also the largest since China transitioned from a tight currency peg to a managed floating valuation in 2005.
The move could help combat a fall in China's exports fueled in part by the currency's relative strength, and marks a departure from policy in previous periods of economic stress, during which Beijing refused to devalue despite upward pressure from the yuan's informal peg to the dollar.
This was preceded by the biggest export drop in four months and worse than expected, reinforcing expectations that Beijing will be induced to apply more quantitative easing (QE) stimulus if the devaluation fails to have the affect desired.
Exports to the European Union fell 12.3 per cent in July while those to the United States dropped 1.3 per cent. Demand from Japan, another big trading partner, slid 13 per cent.
"A recovery in external demand remains far off and economic growth will continue to rely on domestic demand, which implies policies should continue to be relaxed in the second half," wrote HSBC economist Qu Hongbin.
That compared with forecasts for an eight per cent drop, after a 6.1 per cent decline in June, though these falls also reflected weaker commodity prices.
Source : HKSG.