China's weak trade data fuels concerns
China's foreign trade decelerated sharply in April, with both export and import growth falling well short of expectations. That raises fresh concerns about a hard landing for the world's second-largest economy amid weakening global demand.
Exports rose 4.9 per cent last month from a year earlier, while imports rose just 0.3 per cent, data released yesterday by the General Administration of Customs showed.
The results were far below economists' expectations. Market forecasts and surveys had suggested growth of over 10 per cent for imports and growth of around 8.5 per cent for exports.
Most economists agreed that the disappointing data would increase the likelihood of supportive policy measures being announced, since both export and import growth in April saw a pull-back on a monthly basis amid sluggish demand both at home and abroad.
Qu Hongbin, co-head of HSBC's Asian economics research, said the sharp slowdown in export growth underlined the strong external headwinds, while the steep deceleration of import growth signalled sustained weakness in domestic investment demand. China's trade surplus for April widened to US$18.4 billion, up from US$5.4 billion in March, exceeding expectations of above US$10 billion.
Normally a widening trade surplus is a good sign of economic strength, but April's result appeared more related to a weakness in imports, and a sign of deteriorating domestic demand in China for goods ranging from raw materials to consumer goods imported from around the world, and for energy.
Zhiwei Zhang, China chief economist for investment bank Nomura, said the data was likely to have caught policymakers by surprise. Zhang cited the fact that Premier Wen Jiabao had said as recently as April 27 that export and import growth had picked up to 12.7 per cent and 8.3 per cent year on year respectively for the period from April 11 to 20.
Zhang and economists from JPMorgan Chase Bank said the data could prompt the authorities to cut the reserve requirement ratio for banks by 50 basis points in coming weeks.
Mainland stocks saw their gains evaporate after the release of the data, dragging the benchmark index down slightly, while Hong Kong's Hang Seng Index swung from a modest rise to a 0.5 per cent loss.
A batch of key economic data including the consumer price index, industrial output, fixed asset investment, and retail sales, will be released by the National Bureau of Statistics today. Lu Ting, China economist with Bank of America Merrill Lynch, said today's macroeconomic data would offer more useful guidance to the overall direction of the Chinese economy. 'So let's wait until tomorrow for more interesting discussions.'
The slowdown in trade has, however, already weighed on overall economic growth of China's export-oriented economy, which saw growth of its gross domestic product slow to a near three-year low of 8.1 per cent in the first quarter of this year as net exports subtracted 0.8 percentage points from GDP.
In overall foreign trade, the country registered moderate growth of 2.7 per cent year on year to US$308.08 billion in April. For the first four months of the year total foreign trade rose 6 per cent from a year earlier to US$1.17 trillion, with exports and imports up 6.9 per cent and 5.1 per cent respectively to US$593.24 billion and US$573.94 billion.
The trade surplus was US$19.3 billion for the January-April period, the General Administration of Customs said. The European Union remained the nation's largest trading partner in the first four months, but bilateral trade growth slowed considerably to just 0.3 per cent year on year to US$170.53 billion.
The rise in China's exports to the US last month, to US$28.1 billion
- Imports increased 3.2 per cent to US$11.3 billion