Beijing: China Tuesday said its foreign trade in August decreased 9.7 percent year on year to about USD 320.8 billion amid rising concerns over the record drop of USD 93.9 billion in the Communist giant's foreign exchange reserves last month.
Latest data released by General Administration of Customs (GAC) shows that while exports fell 6.1 percent year on year to 1.2 trillion yuan, compared with an 8.9 percent drop in July, the imports slumped 14.3 percent to 836.1 billion yuan, compared with July's decrease of 8.6 percent.
Trade surplus expanded by 20.1 percent to 368 billion yuan in August. In the first eight months of 2015, foreign trade slipped 7.7 percent year on year to 15.67 trillion yuan, the GAC figures showed.
Exports dipped 1.6 percent to 8.95 trillion yuan in the January-August period, while imports fell 14.6 percent to 6. 72 trillion yuan.
Analysts said the recent nearly four percent devaluation of Yuan also helped to push up the value of exports from China, world's largest trading nation.
Qu Hongbin, chief China economist at HSBC, attributed the slump in export growth mainly to sluggish external demand, especially exports to the European Union (EU) and Japan.
Meanwhile, China's foreign exchange reserves fell for the fourth straight month to USD 3.56 trillion in August, down by a record USD 93.9 billion from the previous month.
China, the holder of world's largest forex reserves USD 3,771,347 millions, has accrued its massive foreign exchange reserves by its successful exports in the past few decades. About USD 1.20 trillion of forex reserves were saved in American bonds.
The current foreign exchange reserves mirrored a sluggish foreign trade, said Tan Yaling, dean of the Beijing-based China Forex Investment Research Institute.
"The yuan began to fluctuate in August, and is not the reason for the depletion in reserves since May," she told official daily Global Times.
On August 11, the central bank devalued the yuan by about 2 percent against the US dollar, the biggest one-day currency devaluation in nearly two decades.
"The country's accumulation of foreign exchange reserves was driven by a huge trade surplus over decades," Tan said, adding that slower export growth for some months in the past also affected the amount of foreign exchange reserves.
The sudden drop has sparked off speculation that People's Bank of China (PBC) is selling dollars to support the weakening yuan.
Analysts quoted by the state media attributed the drop in foreign exchange reserves to recent capital outflows in addition to the country's slowing trade.
"While foreign exchange reserves have to be maintained at a reasonable level, authorities are also seeking to reduce foreign reserve risks while controlling the inflow of hot money," said Ding Zhijie, an economics professor at the University of International Business and Economics in Beijing.
He said lower foreign exchange reserves are not necessarily a bad sign, adding that cutting the banks' reserve requirements (RRR) and lowering key interest rates in August was likely to drive away certain amounts of foreign speculative capital.
In August, the PBC announced a cut in the RRR by 50 basis points.
Investors and traders should not be too worried about the drop in foreign reserves, said Zhang Yu, an economist at Minsheng Securities.
"The country still retains huge currency reserves to prevent the yuan from further weakening," she was quoted as saying the paper.
PBC governor Zhou Xiaochuan told a meeting of G20 finance governors in Turkey over the weekend that the yuan lacks a "long-term devaluation base," and that the yuan's exchange rate is stabilising.
"Dwindling foreign reserves could also be seen as an adjustment mechanism," Zhang said.
