SINGAPORE (July 14): China’s “weaker-than-expected” import growth fell 8.4% y-o-y in June, mainly due to a slowdown in ordinary imports for domestic consumption, while exports fell 4.8% y-o-y on weakness across the board.

But HSBC’s Greater China economist Julia Wang says China trade figures are headed even lower when the full impact of Brexit hits.

“We expect both import and export growth to head lower in the near term as Brexit will negatively impact corporate sentiment and investment in the developed markets,” Wang says in a Wednesday report. “In fact, we have probably not yet seen the full impact that Brexit could have on corporate capex in Europe, which is a key market for Asia's exporters.”

“Our view is that as the negative impact ripples through, both export and import growth could take another leg down in the near term,” she adds.

In June, China’s processing exports fell 9.9% y-o-y, while ordinary exports slipped 2.8%.

Ordinary imports dropped by 6.1% y-o-y, partially offset by a growth of 8.6% in processing imports.

“The policy takeaway is that Beijing must focus more on ways to lift domestic demand in order to secure its 6.5% bottom line on growth in 2016 and 2017,” Wang says.