13 February 2009

Chinese trade plunges, fanning worries

The following is excerpted from the February 11the edition of "globeandmail.com".

China's exports plunged in January amid collapsing global demand, adding to the threat of job losses and possible unrest and intensifying pressure on Beijing to boost slumping economic growth.

Exports fell 17.5 per cent in January from the same month in 2008, the third monthly decline and a sharper drop than December's 2.8 per cent, according to customs data released Tuesday. ... It was the biggest monthly decline since October 1998...

The plunge in exports exceeded analysts' forecasts of about 12-14 per cent and could dampen hopes China's slump was bottoming out after data showed the contraction in its manufacturing easing and higher bank lending.

Some analysts said the downturn was not as severe as it appeared because the Lunar New Year holiday, during which many companies close for a week or more, reduced the number of working days in January. The holiday fell in February last year. But even with that factored in, they said trade dropped off in January.

The collapse in global demand for Chinese goods has devastated export-dependent coastal areas. The government says at least 20 million migrant workers have lost their jobs. It is rolling out a 4-trillion yuan ($586-billion) package to stoke consumer spending and has taken steps to help struggling exporters of textiles and other goods.

Imports also plunged in January, by 43 per cent, reflecting a slump in demand for foreign components and raw materials used by Chinese export industries, as well as weaker domestic consumer demand. Up to half of China's $1-trillion in annual imports are materials used in goods that are re-exported...

Exports of machinery and electrical goods fell sharply. Shipments of Chinese-made motorcycles plunged 32.7 per cent and those of electric motors 28.4 per cent. Sales of toys were down 14.7 per cent and those of textiles 12.3 per cent...

Analysts say a recovery in trade depends on the United States and Europe emerging from their own slumps, and the timing of that is unclear...

A deputy commerce minister, Jiang Zengwei, appealed this week for other governments to support free trade. He said China would avoid “buy local” restrictions in its stimulus, rejecting protectionist measures like those in Washington's proposed plan that have provoked criticism abroad.

Beijing is trying to reduce reliance on exports with its stimulus, which calls for spurring consumer spending by injecting money into the economy through government outlays on highway construction and other public works.

Economists say the stimulus should start to take effect in the quarter beginning in April. Some say a recovery could begin as early as the second half of the year but there are no firm signs of an upturn yet. Indicators show manufacturing shrinking and investment and consumer spending weakening...

...Exports will shrink by 7 per cent and imports by 20 per cent in the first quarter of the year from a year earlier...

China's global trade surplus widened to $39.1-billion in January, the third-highest month on record and just ahead of December's $39-billion trade gap.

The politically sensitive trade surplus with the United States widened by 1.9 per cent from the January 2008 to $12.3-billion, according to customs data.

China's import weakness could be a blow for its trading partners, especially Asian economies that rely on Chinese manufacturers as leading buyers of their exports of industrial components and raw materials.