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Denise Tsang

Economists surprised by extent of export, import declines
China's trade with the world took a turn for the worse last month, with exports and imports slumping more than expected  as the global recession deepened.
Exports  fell 17.5 per cent from January last year  to US$90.45 billion,  exceeding economists' forecasts for a 14 per cent drop and much steeper than the 2.8 per cent decline recorded in December.
Imports collapsed 43.1 per cent to US$51.34 billion, the General Administration of Customs said yesterday.  Economists had forecast  a 25 per cent decrease.
Although they anticipated a poor set of  figures, economists expressed surprise at the magnitude of the  decline. Some blamed the drop on fewer working days in January  because of the Lunar New Year holiday. But with consumer and factory-gate prices also sliding, the poor fundamentals of the economy appear to be the main culprit. The spring festival was  in February last year.
'The figures are ugly,' said UBS economist Wang Tao.  'They are  confirming signs of a global recession.'
Goldman Sachs economist Song Yu described the drop in exports as 'extraordinary' even with the Lunar New Year factor.
Overseas shipments to the mainland's top three customers slowed,  with trade with the European Union  falling 17 per cent, the United States 10 per cent and Japan 9 per cent.
Falling demand for  Chinese-made products  was also evident in Asia, where mainland exports  saw a 22 per cent decline  last month. Exports to South Korea fell 29 per cent and were 35 per cent lower to Hong Kong.
As a result of the  steep decline in imports, last month's trade surplus hovered at a relatively high level of US$39.11 billion, barely  changed from US$38.98 billion in December.
Morgan Stanley chief economist Wang Qing said that while the trade figures were in part distorted by the Lunar New Year, there  were indications of 'continuing deterioration in the underlying fundamentals' of the economy.
Mr Wang added  imports were dragged down by falling oil prices, which  were about US$40 per barrel, against their peak at US$147.27 in July last year. Prices of other imports  such as soyabeans, edible oil and iron ore also drifted lower last month.
Although economists widely expected  trade  to stabilise in the second half of this year, the free fall in imports signals underlying weaknesses in domestic demand, according to  Ms Wang at UBS.
'Premier Wen [Jiabao] mentioned during his European tour [last week] possible additional stimulus measures and I imagine the government will allow more incentives to revive industries, boost employment and spending and encourage bank lending,' she said.
Mr Wen  talked of fresh measures to shield the  economy from the global  downturn in addition to the 4 trillion yuan (HK$4.54 trillion) stimulus package announced in November.
Incentives such as higher value-added tax rebates for labour-intensive industries and exports  have taken effect in  recent months.
Yesterday, there was speculation of  measures aimed at boosting light industries such as  production of foodstuffs, home electrical appliances and leather goods.
UBS  said lacklustre trade would cut growth of the mainland's export-oriented economy to 6.5 per cent  this year, lower than the central government's target of 8 per cent.



Mainland trade tumbles on deepening recession