Slower growth expected in China exports and imports

Economists forecast slower growth in January trade figures amid surge in loans

PUBLISHED : Tuesday, 11 February, 2014, 1:57am
UPDATED : Tuesday, 11 February, 2014, 3:43am

The mainland's export and import growth may have cooled last month, according to a poll, underlining a broader slowdown in the world's second-largest economy, although the Lunar New Year holiday effect may overstate the soft momentum.

Weakness in mainland imports could be bad news for the rest of the world, particularly for commodity exporters such as Australia. HSBC estimates China will overtake the United States to become the world's biggest importer this year.

Bank loans were expected to see a typical seasonal surge last month as banks get fresh lending quotas at this time every year, underlining relatively stable credit demand from the real economy.

Many economists expect a soft slowdown in the mainland's economy this year as policymakers try to embrace slower but better-quality growth to cut reliance on investment and pursue sustainable development.

"Given the stable economic situation last year and increasing expectations over pushing forward reform, economic growth is facing increasing pressure in the short term," China Merchant Securities economist Xie Yaxuan said in a note.

Fears of a sharper-than-expected loss of momentum on the mainland were believed to be one contributing factor in a fierce global financial market sell-off last month, with emerging markets hit particularly hard.

The median forecast of 19 economists polled showed export growth likely slipped to 2 per cent year on year from 4.3 per cent in December, while import growth eased to 3 per cent from 8.3 per cent.

Analysts said the reported export data was distorted by the Lunar New Year holiday, during which time most factories shut for extended breaks, and last year's high base, which was inflated by speculative trade activities disguised as exports.

"Caution must be taken when interpreting the numbers as seasonal volatility in the run-up to Chinese New Year is likely to have distorted the headline figures," analysts at Capital Economics said.

Even if Chinese economic growth sank to a 24-year low of 7.4 per cent this year, it would still grow nearly three times as fast as the US economy, and would therefore add twice as much demand to the world economy compared to the US, HSBC economist Frederic Neumann said in a note earlier this month.

New yuan loans were forecast to have surged to 1.1 trillion yuan (HK$1.4 trillion) last month, more than double December's figure and on par with 1.07 trillion yuan in January 2012. Broad M2 money supply was likely to have grown 13.2 per cent, after 13.6 per cent in December.