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Chinese exports tumble in February, raising fears of economic slowdown

Trade balance slips into deficit as February exports fall 18pc and imports increase 10pc

PUBLISHED : Sunday, 09 March, 2014, 5:30am
UPDATED : Sunday, 09 March, 2014, 5:30am
 

China's exports fell the most since the global financial crisis in February, swinging the trade balance into deficit and adding to fears of a slowdown in the world's second-largest economy.

Despite the Lunar New Year holidays being blamed, the sharp and unexpected drop in exports follows a series of factory surveys since the start of this year that point to weakness in economic activity as demand falters at home and abroad.

Exports in February fell 18.1 per cent from a year earlier, following a 10.6 per cent jump in January, the General Administration of Customs said yesterday.

Imports rose 10.1 per cent, yielding a trade deficit of US$23 billion for the month against a US$32 billion surplus in January.

That compares with market expectations in a Reuters poll of a rise of 6.8 per cent in exports, an 8 per cent rise in imports and a trade surplus of US$14.5 billion.

Analysts cautioned against reading too much into single-month figures for January or February, given possible distortions caused by the long Lunar New Year holiday. Many plants and offices shut for extended periods during the festival.

Still, combined exports in January and February fell 1.6 per cent from the same period a year earlier, versus a 7.9 per cent full-year rise in 2013. Imports rose 10 per cent year-on-year in the first two months, compared with a 7.3 per cent rise in 2013.

"February export numbers were a surprise on the downside, and even combined January-February numbers were below market expectations," said Li Heng, an economist at Minsheng Securities in Beijing.

"The data shows that the economy faces relatively big downward pressures and macro-policies need to be loosened a bit."

The government may step up fiscal spending to support some investment projects if growth slows further, given there is limited room for the central bank to loosen policy, Li said.

Exports to the United States edged up 1.3 per cent in the first two months from a year earlier, while sales to the European Union rose 4.6 per cent, according to official data.

China's trade outlook is widely expected to be rosier this year in line with a recovery in developed countries. Li said he expected exports to pick up in March.

Ting Lu, an economist at Bank of America-Merrill Lynch in Hong Kong, said that inflated export data in January-February 2013 means a direct year-on-year comparison can be misleading.

Fake trade deals to sneak cash into China past the country's strict capital controls were rampant early last year before Chinese regulators cracked down.

After adjusting for such distortions, export growth in the first two months of this year could actually be up about 8 per cent, Ting Lu calculated.

Recent weakness in the yuan is seen as having been orchestrated by the central bank to squeeze out speculators and deter hot money inflows.

China was fully confident of achieving its 7.5 per cent growth target in total trade this year, Commerce Minister Gao Hucheng said on Friday, citing an improving global economic environment.

The country's combined exports and imports grew 7.6 per cent in 2013, just short of the official target of 8 per cent.

China's goods trade in 2013 hit US$4.16 trillion, meaning it overtook the United States for the first time to become the world's largest goods trading nation, Gao said on Friday.

China aims for annual economic growth of 7.5 per cent in 2014, after the economy expanded 7.7 per cent in 2013, close to the weakest pace of growth seen since the late 1990s.

A resilient Chinese economy is good news for the world, particularly for major commodity exporters such as Australia.

China's crude oil imports in the first two months of the year rose 11.5 per cent from a year earlier, while imports of copper jumped 41.2 per cent and iron ore shipments rose 21.8 per cent, customs data showed.

The statistical bureau will release combined data on January-February retail sales, industrial output and investment for January and February on Thursday. The figures are expected to show a slightly slower rate of growth than in December.

February inflation data will be published today.

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