Decline in China's exports, imports in June steeper than expectations

China witnessed a decline in its exports which fell more than expected while imports also saw a steeper fall than forecast, in a sign that the mainland's factory orders continued to slow. Also, global demand remained stubbornly weak and Britain's decision to leave the European Union clouded the outlook for one of Beijing's biggest markets.

While exports fell 4.8 percent y/y, imports declined 8.4 percent, in US dollar terms, resulting in a trade surplus of USD48.11 billion in June, versus forecasts of USD46.64 billion and May's USD49.98 billion. In yuan terms, exports rose 1.3 percent from a year ago, while imports declined 2.3 percent.

Moreover, on Tuesday, the People's Bank of China's (PBOC) set the dollar-yuan fix at 6.6950, or a five-year low for the Chinese currency, although it walked that back a tad on Wednesday, setting the fix at 6.6891. The spot currency is allowed to move 2 percent in either direction from the fix level during daily trade.

China's trade data have been closely watched not only for indications of the health of the mainland's slowing economy, but also for signs of how the transition from an emphasis on manufacturing to consumption-based growth is proceeding.

"Brexit will cloud China's export outlook," economists at ANZ said in a note Wednesday.

The research bureau of the People’s Bank of China downgraded its trade forecasts for 2016 in June. It expects exports to fall one per cent this year, compared with its previous projection of a rise of 3.1 per cent.

Meanwhile, China will announce its second quarter growth data on Friday, together with indicators on investment, industrial output and retail sales. China’s economy grew 6.7 percent in the first quarter. Earlier June economic data have already shown weaknesses in the economy.