Mon, Feb 09, 2015 - Page 13 News List

China trade performance slumps

‘PRETTY HORRIBLE’:Economist Andrew Polk said that the world’s second-largest economy had a ‘substantial slowdown in the industrial sector’ in the first quarter

Reuters, SHANGHAI

An employee tests newly made light bulbs on a production line in a factory in Jiaxing, China, on Friday last week.

Photo: Reuters

China’s trade performance slumped last month, with exports falling 3.3 percent year-on-year while imports tumbled 19.9 percent, far worse than analysts had expected and highlighting deepening weakness in the Chinese economy.

Largely as a result of the sharply lower imports — particularly of coal, oil and commodities — China posted a record monthly trade surplus of US$60 billion.

The slide in imports is the sharpest since May 2009, when Chinese factories were still slashing inventories in reaction to the global financial crisis. Exports have not produced a negative annual reading since March last year.

The dismal trade performance is likely to increase concerns that an economic slowdown in China — originally considered a desirable adjustment away from an investment-intensive export model toward one based on domestic consumption — is at risk of derailing.

The government is expected to lower its GDP target to about 7 percent this year, after posting 7.4 percent last year — the slowest pace in 24 years.

Chinese economic indicators in January and February are typically viewed with caution given the distortions caused by the shifting week-long Lunar New Year holiday.

However the data — in particular the import data — is worrisome even after accounting for cyclical factors; last year the new year holiday idled factories and financial markets for a week in January, but this year the holiday comes this month and last month was a full month of business as usual.

“It’s a very strange data print,” Conference Board China Center economist Andrew Polk said, adding that exports tended to be less effected by the holiday than other indicators, but that he was more concerned by the implications of the startlingly negative import figure.

“The import data suggests a substantial slowdown in the industrial sector. The first quarter looks to be pretty horrible,” he said.

Investors hoped that the announcement of domestic stimulus spending plans, combined with moves to ease monetary policy, including a reduction in banks’ reserve requirement ratios on Wednesday last week, would restore confidence and boost demand in China’s struggling manufacturing sector.

However, many analysts believe measures taken so far to boost yuan liquidity are insufficient to do much more than offset surging capital outflows. Advocates of more aggressive action are likely to seize on the weak trade data for last month to support their case.

Chinese imports have fallen every month since October last year, seen as reflecting weak domestic demand, and the scale of last month’s drop was mostly due to an across-the-board fall in import volumes of major commodities.

For example, coal imports dropped nearly 40 percent to 16.78 million tonnes, down from 27.22 million tonnes in December last year, and China also appeared to cut back on its strategic stocking of crude oil imports, which slid by 7.9 percent in volume terms.

Imports from Australia and the Russian Federation, both major fuel and commodity suppliers, slid by 35.3 percent and 28.7 percent respectively.

The data showed that while exports to the US rose by 4.8 percent year-on-year to US$35 billion, exports to the EU slid 4.6 percent to US$33 billion in the same period.

Exports to Hong Kong, South Korea and Japan were also down, with exports to Japan slumping over 20 percent.

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