Welcome to the Investors Trading Academy event of the week.
Each week our staff of analysts and educators tries to provide you a better understanding
of a major market event scheduled during the next week.
This week we will focus on the Chinese trade balance report due which is usually released
the first week of each month.
This month the report is due on February 8th.
The Trade Balance measures the difference in value between imported and exported goods
and services over the reported period.
A positive number indicates that more goods and services were exported than imported.
Since the global economy is so dependent on Chinese imports and export this release is
crucial to the markets.
There are three major parts of the release, the total trade balance and then total imports
and exports.
As China reinvents its economy these numbers are more important as imports into China continue
to grow as consumer purchases steadily grow.
The Chinese domestic economy is growing faster as the government pushes internal project
to help stimulate growth.
China’s trade balance has a great effect on the New Zealand and Australian dollars
as well as industrial metals.
With Chinas GDP slowing significantly traders look closely at these numbers.
Gross domestic product expanded an annual 7.3 per cent in the third quarter, the slowest
since the height of the global financial crisis in early 2009 and economists are broadly expecting
there to have been further weakness at the end of last year and in the year ahead as
authorities face what they themselves openly describe as a “new normal” of slower,
and hopefully, more sustainable expansion.
Under the government's reform initiatives, the private sector currently generates more
than 60 percent of the nation's economic output and more than 90 percent of new jobs each
year.
The world's second largest economy grew 7.4 percent in 2014, marking the weakest annual
expansion in 24 years.
Despite the slowdown, the private sector had stabilized employment as the country managed
to create 13.22 million new jobs last year, beating the government's target of 10 million
for the year.
China’s export sector has had a passable year, with demand from the wider world up
modestly.
Exports are forecast to grow 6.6% on-year in December, up from 4.7% in November, according
to the Journal’s survey.
But China’s imports have stumbled this year, with demand weak amid uncertainty over the
strength of the economy and soft raw materials prices dragging down the value of China’s
purchases.
The poll predicts inbound shipments will drop 7% in December, after a 6.7% fall the month
before.
That will keep China’s gaping trade surplus wide open – the economists predict a $49.4
billion balance for the month.