China’s export growth plummeted to a 10-month low last month and imports unexpectedly fell as a crackdown on fake trade shipments exposed weakness in global demand.
Overseas sales rose 1 percent from a year earlier, the General Administration of Customs said in Beijing yesterday, trailing 35 of 38 analyst estimates in a Bloomberg News survey and down from April’s 14.7 percent pace. Imports dropped 0.3 percent, leaving a trade surplus of US$20.4 billion.
The report reflects a government campaign to root out illegal capital inflows disguised as trade that had inflated figures and added to appreciation pressure on the yuan.
It also underscores the challenges Chinese Premier Li Keqiang (李克強) faces as overseas demand stalls, while rising home prices, financial risks and overcapacity at home limit room to boost the economy.
“This shows the real state of the Chinese export situation,” said Shen Jianguang (沈建光), chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong.
The data show a “pretty depressed” picture, with weak external demand and a yuan that has appreciated substantially against a trade-weighted basket of currencies, said Shen, who previously worked at the European Central Bank (ECB).
The slowdown in last month’s figures was partly the result of “arbitrage trade” with Hong Kong being curbed, the customs administration said in a statement yesterday. Appreciation in the yuan and the worsening trade environment, as well as a domestic slowdown, weak external demand and high business costs, also contributed, the agency said.
The Chinese State Administration of Foreign Exchange last month started a campaign to curb money flows disguised as trade payments that had inflated export data.
China’s exports to Hong Kong fell to US$28 billion last month from US$39.5 billion in April, according to customs data. Growth in sales through bonded zones, which lie within China’s borders and handle shipments as international trade, slumped to a year-on-year pace of 45.8 percent last month from April’s 253.5 percent.
Data due today on industrial production and retail sales for last month and fixed-asset investment for the first five months are forecast to show little change from April’s growth rates.
Analysts last month trimmed economic expansion forecasts for the April-June period to a median projection of 7.8 percent from an 8 percent pace forecast in April.
Li, who took office as premier in March, has resisted adding stimulus to the economy as the new leadership tries to make growth more sustainable and avoid stoking financial risks.
Yesterday’s trade figures reflect a “normalization,” said Hu Yifan (胡一帆), chief economist at Haitong International Securities Co in Hong Kong, the only analyst to forecast declines in exports and imports.
“We expect export growth to remain modest but import growth to pick up along with implementation of supportive policies,” she wrote in a note yesterday.
The trade slump adds to concerns that the global recovery is losing momentum even as the US shows signs of strengthening.
The ECB this week forecast the 17-nation eurozone would contract 0.6 percent this year, more than its March estimate of 0.5 percent. In the US, employers added more workers than forecast last month.
Even so, China’s exports to the US fell 1.6 percent last month from a year earlier and imports from the US dropped 1.5 percent, the first time since 2009 that both showed a decline in the same month.