A bigger-than-expected slide in Chinese imports last month bolstered expectations that more policy stimulus might be needed to avert a sharp slowdown in the world’s No. 2 economy.
Economists said that persistent weakness in the nation’s imports suggests a slackening domestic Chinese economy. Meanwhile, erratic global demand and a relatively strong yuan also cast doubt over Beijing’s ability to hit its full-year trade growth target of 6 percent.
Annual exports last month fell by 2.5 percent, while imports tumbled 17.6 percent, data from China’s General Administration of Customs showed yesterday.
“The data show that the Chinese economy is still in the process of seeking a bottom. We expect trade conditions to continue to be sluggish in the following four to five months, with more government policy rolling out to stabilize [the economy],” said Liu Yaxin (劉亞欣), macro strategist at China Merchants Securities in Shenzhen, China.
Liu added that Chinese companies were being outflanked in global markets due to a relatively strong yuan.
China posted a near-record trade surplus last month of US$59.49 billion, but weak imports highlight slowing domestic consumption.
Many analysts have already penciled in growth of less than 7 percent for the second quarter, raising the risk that Beijing would not meet its full-year growth target of about 7 percent.
Chinese exporters have been struggling to cope with weak overseas demand and rising costs for labor and foreign exchange, exacerbating downward pressure on the economy.
Last month, exports to the US, China’s top export market, rose 7.8 percent from the year before, while shipments to the EU, the No. 2 market, dipped 6.9 percent, customs data showed.
China’s leading index on exports fell last month, the third straight month of decline, heralding “the relatively big pressure” on exports this year, customs said.
The yuan has gained against major non-US-dollar currencies in recent months, leading to its rise on a trade-weight basis, but Chinese Premier Li Keqiang (李克強) has ruled out a devaluation.
Imports of oil and iron ore last month fell by 11 percent from the year before, underscoring soft demand at home and oversupply. Bloated stocks could take months to draw down, prompting steel mills to pump up exports of steel, even at weak prices.
“The price differentials [last month] were not favorable for imports. That, coupled with continued weak demand for financing buying, pushed down the inflows,” Jin Yidan at Minmetals Jingyi Futures said.
China’s trade grew just 3.4 percent last year, missing Beijing’s growth target of 7.5 percent by more than half.
Combined exports and imports fell 8 percent in the first five months from the previous year, customs data showed.
“The government set up the target of trade growth at 6 percent this year, which at this moment, is still impossible to achieve, particularly with the weak imports,” JPMorgan chief China economist Zhu Haibin (朱海濱) said in Hong Kong. “Even with export growth, it is quite challenging to meet the 6 percent target.”
Economists polled by Reuters expect some signs of steadying in China’s economy in the months ahead, thanks to stimulus measures, but said that more policy support might be needed.
China cut interest rates for the third time in six months last month — on top of two reductions in the amount of money that banks must keep in reserve — in a bid to lower borrowing costs and stoke a sputtering economy that is headed for its worst year in a quarter of a century.
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