China imports shrink to 6.3% in June

Exports dropped as well to 11.3%.

According to Nomura, China's export growth dropped to 11.3% y-o-y in June from 15.3% in May. By export destination, growth to the US slowed to 10.6% y-o-y in June from 23.0% in May, growth to Japan slowed to 0.1% from 13.0% and growth to the EU slowed to -1.1% from 3.4%.

Here's more from Nomura:

Import growth fell sharply to 6.3% y-o-y in June from 12.7% in May. It appears that both external and domestic demand slowed. After adjusting for working days, import growth for processing trade (i.e. imported components that are assembled into finished goods for export) fell to -1.9% y-o-y in June from 7.3% in May. Growth of ordinary imports for domestic consumption fell to 6.3% y-o-y in June from 13.4% in May. Lower commodity prices contributed to weaker imports, but the price effect does not seem to be the whole story.

On a year-on-year basis, import growth of iron ore, crude oil, and copper in volume terms slowed to14.1%, 10.3%, and 23.6% in June from 19.8%, 18.2%, 64.8%, respectively. These trade data indicate that the economy continues to slow and are consistent with Premier Wen's speech over the weekend that acknowledged "economic growth faces downward pressure".

We maintain our view that the pace of policy easing will pick up in the near term. The next RRR cut may happen as early this month, and bank lending will likely rise in coming months. If the effects of policy easing fail to materialize quickly in July and August, downside risks for the H2 growth outlook will increase.

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