Import growth rate slowest in two years
China's imports grew at the slowest pace in more than two years last month, ratcheting up pressure on Beijing to shore up domestic demand and protect the economy from a potential recession in the euro zone.
The value of inbound shipments grew 11.8 per cent in December to US$158.2 billion, slowing from 22.1 per cent growth in November and way below economists' consensus forecast of an 18 per cent expansion. That is the slowest pace since September 2009.
Exports, though, grew 13.4 per cent - down slightly from their 13.8 per cent growth in November - amid the turmoil in the European Union and the United States, China's top two export markets.
Economists said the drop in import growth underscored weak domestic consumption, and would bring calls for looser monetary policy and stimulus measures, such as a reduction in the funds banks must hold in reserve, tax cuts to help smaller firms and increases in spending on social welfare and rural housing.
The value of imports, a large proportion of which are components that go into products for export, was partly dragged down by lower commodities prices. Iron ore prices, for example, fell 9.7 per cent last month.
Some economists said December's trade data could have been distorted by the Lunar New Year. The holiday, when factories shut down and so reduce their component imports, falls in January this year.
'The next few months will be tough,' HSBC chief economist Qu Hongbin said. 'We expect more easing measures to shore up domestic demand and mitigate the impact of a further external slowdown.'
Economic growth this year is forecast to slow to 8.5 per cent, from 9.2 per cent last year - the slowest expansion since growth of 8.3 per cent in 2001.
Qu said the reserve requirement ratio for banks - the proportion of assets they are required to hold as a buffer, rather than lend or invest - could be lowered by as much as 1.5 percentage points in the next few months. The ratio for large banks is 21 per cent and for smaller banks it is 19 per cent.
China's exports last year were worth US$1.89 trillion, an increase of 20.3 per cent from 2010, when exports grew 31.3 per cent year on year. Imports totalled US$1.74 trillion, up 24.9 per cent from 2010, when they grew 38.9 per cent year on year, the General Administration of Customs announced yesterday.
Commerce Minister Chen Deming said last week the full-year trade surplus was 14.5 per cent lower than in 2010, at US$155.14 billion. He vowed the government would stabilise trade and spur domestic consumption, without saying how.
Nomura economist Zhang Zhiwei said a narrower trade surplus would help ease pressure for the yuan to rise in value against other currencies. He expects it will appreciate 2.4 per cent against the US dollar this year, less than half the 4.9 per cent rise last year.
Citigroup estimates the yuan will appreciate 1.5 per cent against the greenback this year.
If the yuan rises less against the dollar, that should in theory help exporters, but economists expect export growth to be in the single digits this year.
HSBC forecasts the euro zone will slip into recession, with its economy contracting by 1 per cent this year, and the US will experience 'below par growth' in the foreseeable future.
7.7%
China's gross domestic product growth in the first quarter of the new year, as projected by UBS Securities
