Focus on China as English seeks trade opportunities

Bill English.
Bill English.
Finance Minister Bill English is off to China this week, a week in which China's equity markets and economic data are sure to make world headlines.

Mr English said in a statement he would focus on the economic developments taking place in China's inland regions and what it meant for New Zealand.

The development was supported by the ''One Belt, One Road'' initiative which sought to create a new silk road to improve trade links with Asia, Europe and the Pacific.

''China is New Zealand's second-largest export market. Developing and capitalising on New Zealand's relationship with China is crucial in advancing our economic interests,'' he said.

Craigs Investment Partners broker Chris Timms said it would be a heavy week for Chinese economic data, including second-quarter GDP (economic activity).

''China will remain in focus this week, although moves in equity markets might have to share the headlines with economic data.''

China's June exports exceeded analyst expectations yesterday, rising 2.8% from a year earlier, while imports fell by 6.1%, both figures handily beating forecasts.

The totals left the country with a trade surplus of $NZ60.99 billion for the month, the General Administration of Customs said.

Tomorrow, monthly retail sales, industrial production and fixed asset investment data will be released at 2pm.

At the same time tomorrow, China's GDP for the June quarter would be released and economists were picking a fall below 7% annual growth, given the evidence of slowing economic momentum, he said.

For now, Chinese equity markets had stabilised.

Chinese authorities had pulled out all the stops to stem the losses highly leveraged investors were facing as markets fell from record highs and margin calls occurred, Mr Timms said.

The Shanghai Composite rebounded 10.6% in the final two days of trading last week, having been down 32% in three and a-half weeks on Wednesday.

''The index is still 24.9% below its highs, although we shouldn't forget it rose more than 150% in the 12 months leading up to June 12, so many investors will still be sitting on very large gains.''

The index was still up 87.6% compared to a year ago, he said.

The likelihood of this spilling over into the real economy in a major way appeared unlikely.

Until a month ago, the sharemarket was rising fast while the real economy had been losing momentum for 18 months.

Sharemarket activity had been completely detached from economic activity for some time.

However, given the amount of leverage many Chinese domestic investors have taken on and the potential for it all to unwind further, more volatility was ''highly likely'', Mr Timms said.

Green Party co-leader Metiria Turei said the Government could no longer afford to be complacent on a possible economic slowdown in China, given New Zealand's high exposure to China and Australia.

China's troubles would have a double-whammy effect on New Zealand's export economy, given it was the country's largest trading partner. Australia was also being hit by China's economic slowdown.

''Our exports to our two biggest trading partners - China and Australia - are both at risk from events taking place in China right now.

''Other parts of the economy, like domestic retail spending, can step up up to offset falls in export values but our long-term economic prosperity depends on the value we add to our exports.''

By focusing on investing and developing the dairy sector, National had made a short-term bet on dairy prices rather than building a diversified, resilient export sector, Mrs Turei said.

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