China’s exports plunged 22.6 percent last month from a year ago, the sixth straight monthly decline, the government said yesterday, while a torrent in bank lending meant to boost the economy lifted spending on factories and other fixed assets.
Last month’s decline in exports, to US$91.9 billion, is bigger than March’s 17 percent drop and suggests China’s trade sector has yet to see much relief from the prolonged drought in demand brought on by the global downturn.
But there were some glimmers of positive news even in the trade figures. While exports of heavy machinery and other industrial equipment continue to fall, recent increases from the previous month in exports of clothing, shoes, plastics and other labor-intensive consumer goods suggest some recovery in demand, economists say.
PHOTO: AP
US retailers have begun ordering to restock low inventories, amid signs that consumer spending may be stabilizing, Jing Ulrich (李晶), chairwoman for China equities at J.P.Morgan said in a note.
“Nevertheless, operating conditions for Chinese exporters will remain challenging for some time,” Ulrich said, noting that orders at the recent spring trade show in Guangdong fell 17 percent compared with the autumn show.
Demand for imports remains weak. Imports fell 23 percent to US$78.8 billion, the Customs Administration reported, putting the trade surplus for last month at US$13.1 billion. That compared with an US$18.6 billion surplus in March.
Meanwhile, China’s investments in factories and property development jumped 30.5 percent from a year earlier in the first four months of the year to 3.71 trillion yuan (US$543.2 billion), thanks to a slew of bank loans for government stimulus projects. The growth rate was 1.9 percentage points higher than in the first quarter, the National Statistics Bureau said.
China’s banks issued about 5.2 trillion yuan in new loans in January-April of this year, heeding government orders to finance infrastructure projects aimed at boosting employment and stimulating demand.
The surge in investment reflects that trend.
However, a two-thirds drop in new lending last month compared with March, to 591.8 billion yuan, suggests that spending may moderate in coming months as the economy absorbs the huge inflows.
Investment in the private sector remains relatively weak, economists say, and concern is mounting over potential risks of bad debt and waste from excess investment in factory capacity and other projects.
Still, given the protracted weakness in overseas demand for China’s exports, the spending is seen as necessary for a recovery.
“Although much of the new bank lending has not yet turned into faster growth in economic activity, because of the time lag between lending and actual demand, we do expect fixed investment to accelerate in the coming months,” Tao Wang (王濤), an economist with UBS, said in a report on Monday.
“As a result, we expect orders to rise and industrial production to rebound,” she said.
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