China’s trade performance last month was worse than expected as tepid demand persisted at home and abroad, raising expectations of further government measures to arrest the slowdown and to quell market jitters.
Last month, exports fell 11.2 percent from a year earlier — the seventh straight month of decline — while imports tumbled 18.8 percent — the 15th month of decline, data released by China’s General Administration of Customs showed yesterday.
Exports declined even though China has allowed the yuan to weaken nearly 6 percent against the US dollar since August last year, underlining the extent to which global demand has weakened.
China posted a record trade surplus of US$63.3 billion last month, partly due to soft demand and falling commodities prices, versus US$60.09 billion in December.
“Overall, we believe the sharp drop of trade in January was a reflection of weak external demand, especially given the weak exports of neighboring economies such as [South] Korea and Taiwan,” ANZ economists Liu Ligang (劉力剛) and Louis Lam (林慕爾) wrote in a research note.
“The record-level trade surplus indicates that China continued to run a large current account surplus, and this should help offset some of the capital outflow and alleviate some depreciation pressure on the renminbi [yuan],” they said.
Analysts polled by Reuters had expected exports to fall 1.9 percent, after slipping 1.4 percent in December, while imports had been expected to drop only 0.8 percent, following a 7.6 percent slide in December. The poll forecast a trade surplus of US$58.85 billion.
China will keep the yuan basically stable against a basket of currencies and it will not allow speculators to dominate market sentiment regarding China’s foreign exchange reserves, People’s Bank of China Governor Zhou Xiaochuan (周小川) was quoted as saying on Saturday.
Chinese Premier Li Keqiang (李克強) has said Beijing will not promote exports through currency depreciation, although some policy advisers have been calling for sharper yuan falls.
“Today’s numbers hint that Chinese currency is still under pressure to weaken. That said, strength in onshore and offshore yuan is largely due to the central bank’s effort to dampen speculative positions,” said Zhou Hao (周浩), Commerzbank Asia senior emerging markets economist in Singapore.
Chinese exports to the US, its biggest market, fell 9.9 percent year-on-year last month, while exports to the EU — its second-biggest market — dipped 12 percent, the customs data showed.
The customs office said it expected downward pressure on Chinese exports would ease, starting in the second quarter this year.
A source at the Chinese Ministry of Commerce also said that the government would not set an annual target for foreign trade this year.
Some economists, such as those at ANZ, suspected that false trade invoicing, often used to hide speculation in the yuan, may have distorted last month’s numbers even further, pointing to big swings in trade with Hong Kong.
Fake transactions were widely suspected to be one reason behind a much milder drop in December trade than markets had expected.
The customs data showed that Hong Kong’s exports to mainland China fell 2.6 percent year-on-year in dollar terms, while its imports from the mainland jumped 108.1 percent.
China’s total trade last year tumbled 8 percent from 2014, well below the government’s target of 6 percent growth and the worst performance since the global financial crisis.
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