Kevin Yao Beijing
CHINA’S imports shrank unexpectedly last month while export growth slowed, fuelling concerns the second-largest economy could be facing a sharper slowdown and adding pressure on policymakers to ramp up stimulus measures.
Exports rose 4.7 percent from a year earlier, while imports fell 6.7 percent, the biggest drop since March, data released by the General Administration of Customs showed yesterday.
That left the country with a record trade surplus of $54.5 billion (R617.6bn), which analysts say could increase upward pressure on the yuan even as exporters are struggling.
Economists had expected exports to grow 8.2 percent, a 3.9 percent rise in imports and a trade surplus of $43.5bn, all slowing from October.
“Despite another record surplus, the details paint a grim picture with slower export growth and a contraction in commodity imports in volume terms,” Andy Ji, a senior currency strategist at Commonwealth Bank of Australia in Singapore, said.
Exports have been the lone bright spot for China’s economy in the last few months, perhaps helping to offset soft domestic demand, but there have been doubts about the accuracy of the official numbers amid signs of a resurgence of speculative currency flows through inflated trade receipts.
Dariusz Kowalczyk at Crédit Agricole CIB in Hong Kong said over-reporting in exports might have been curbed last month, which contributed to a weaker reading. But he added that the import contraction was “shocking”, reflecting not only lower commodity prices but poor domestic demand.
“This means that pressure will rise on the government to do more to stimulate growth,” he said. “We expect a reserve requirement ratio cut in December, introduction of reverse repos this week, and another rate cut in the first quarter. The yuan should rise further on the data.”
After saying for months that China did not need any big economic stimulus, the People’s Bank of China surprised financial markets by lowering rates on November 21 to shore up growth and help companies pay off mountains of debt.
The government is due to release data on factory output, fixed asset investment and retail sales later this week.
Analysts see more policy support in coming months if the economy continues to stumble, with many expecting both more rate cuts and reductions in banks’ reserve requirement ratios. Hopes of more stimulus have pushed China’s benchmark stock indices to their highest in more than three years.
Sources familiar with China’s policymaking said leaders were prepared to lower rates again and loosen lending curbs on concerns that falling prices could cause a spike in bad loans, business failures and job losses.
Annual economic growth slowed to 7.3 percent in the third quarter, the weakest since the global financial crisis, weighed down by a sagging housing market and tighter credit conditions.
Full-year growth is on track to undershoot the government’s 7.5 percent target and mark the weakest expansion in 24 years. The slowdown is expected to persist well into next year.
China’s leaders are reluctant to repeat strong stimulus similar to the one implemented during the height of the global crisis, which resulted in piles of debt, but they are mindful of the risk that a sharper slowdown could undermine reforms.
The leadership was due to open a key meeting today to map out 2015 economic and reform plans, including economic targets that would be unveiled in March, sources at top government think-tanks said. – Reuters