China export targets in doubt as Europe bites

Export goals are thrown into doubt as firms report business confidence falling to 'zero'

PUBLISHED : Saturday, 08 September, 2012, 12:00am
UPDATED : Saturday, 08 September, 2012, 2:55am

Mainland toy merchant Pan Junping says this is usually among his busiest times as customers in the US and Europe order Christmas stock, but this year, he is quieter than ever.

"The situation is possibly worse than 2009, and confidence is zero," Pan said. He has frozen salaries and expects a 30 per cent drop in annual sales for his trading company in Yiwu, in Zhejiang province. "It's not busy at all."

Europe's crisis is diminishing China's prospects for reaching a goal of 10 per cent trade growth this year and strengthening the case for more investment stimulus such as roads and underground railways, monetary easing and tax relief for companies such as Pan's.

A report due on Monday may show a 2.9 per cent gain in exports for last month from last year, down from 18 per cent growth over the past two years, based on the median estimate in a survey.

The slowdown is weighing on companies such as China Cosco Holdings, the country's largest listed shipping line, after the European Union this year slipped behind the United States as China's biggest export market.

The National Development and Reform Commission yesterday said it approved plans to build 2,018km of roads, described by Bank of America as among "real actions" by the government to arrest a slowdown. The bank also cited railway projects and increased land supply in cities including Guangzhou, Hangzhou, Beijing and Shanghai.

"We believe this new approach of policy stimulus is in the right direction because adding home supply and improving urban infrastructure are the two best ways to contain home prices, speed up urbanisation and increase social welfare," Lu Ting, Bank of America's chief Greater China economist in Hong Kong, said.

Asian stocks rose the most in a month yesterday after the European Central Bank announced a bond-buying plan and US companies boosted hiring.

Elsewhere in Asia, export data may show a slowdown for Malaysia, while Australia and Taiwan will also report trade figures. Malaysian export growth may have slowed to 3.5 per cent in July from 5.4 per cent the previous month, according to the median estimate of economists.

In the US, the jobless rate was expected to hold at 8.3 per cent and employers added fewer workers last month.

Mexico will decide interest rates with Banco de Mexico board members probably keeping the benchmark rate unchanged at 4.5 per cent, according to a survey. China's growth deceleration has cut corporate earnings, helping send the Shanghai Composite Index of stocks down 6.7 per cent this year. The gauge is near the levels immediately after the 2008 collapse of Lehman Brothers, which was followed by a 16 per cent drop in exports in 2009.

The index rose 3.7 per cent yesterday. The yuan has weakened about 0.8 per cent against the US dollar this year after gaining 4.7 per cent last year.

Beijing may boost aid to exporters after sales growth slid to 7.8 per cent in the first seven months of the year and imports gained 6.4 per cent.

The authorities plan to increase export tax rebates on products including shoes and ceramics, according to business sources.

Officials have refrained from easing monetary policy since cutting interest rates in June and July and lowering banks' reserve requirements three times from November to May.

Authorities have shied away from stimulus near the scale of the 4 trillion yuan (HK$4.8 trillion) package announced in 2008, during the global crisis when more than 20 million unskilled migrant factory workers lost their jobs.