China to struggle to hit annual growth target after 'woeful' July trade figures
Li Keqiang to face extra pressure to get economy back on track, analysts say, as July figures for imports and exports are described as 'woeful'
China will struggle to meet its full-year 7 per cent growth target after a worse-than-expected drop in July's trade figures - adding to pressure on Premier Li Keqiang to roll out more incentives to get the economy back on track.
Exports last month were valued at US$195.1 billion - down 8.3 per cent from a year ago, the General Administration of Customs announced yesterday. Imports fell 8.1 per cent year-on year to US$152.1 billion, the ninth consecutive month of negative growth of inbound shipments.
"It was a woeful start for the third quarter," said Li Huiyong, chief economist at Shenwan Hongyuan Securities.
"What's worse, the outlook for external demand also remains gloomy for the second half of this year," Li added.
The dire latest economic figures will force the premier and cabinet to adjust policy to meet the short-term growth goals.
"It is increasingly difficult to meet the 7 per cent target," said Liu Xuezhi, an analyst at the Bank of Communications.
"The government needs to speed up efforts to bolster exports and investments."
The latest figures came as top Communist Party leaders met in the seaside resort of Beidaihe in Hebei province, where economic issues are expected to top the agenda.
The foreign trade figures largely fell short of economists' expectations and followed a poor showing of the index that gauges mainland business activity.
Analyst predicted exports would drop by up to 3 per cent in July, after a 2.8 per cent rise in June, while forecasting a fall in imports of less than 2 per cent.
"China's trade growth is unlikely to pick up significantly in the remainder of the year," ANZ said in a report.
"It is unlikely that the government can obtain the trade growth target of 6 per cent set at the beginning of this year."
On August 3, the release of the Caixin/Markit China Manufacturing Purchasing Managers' Index showed business activity fell to its lowest level for two years, as the indicator slid to 47.8 in July - down from 49.4 in June.
Anything below 50 reflects a contraction.
China's economy grew 7 per cent in this year's first half - barely meeting the cabinet's 7 per cent target for the whole year.
The World Trade Organisation said in April weak global economic growth meant it had cut its growth forecast for the year from 4 per cent to 3.3 per cent.
Mainland leaders have been chasing sustainable economic growth to help keep enough people in jobs and ensure income growth for all workers.
Policymakers had envisioned a "new normal" model - slower, but more healthy and sustainable growth driven by stronger consumer spending and entrepreneurship, rather than massive asset investments.
Beijing has cut interest rates four times since November to underpin the slowing economy, but analysts said the effect was minimal since the businesses had yet to benefit from the easing monetary policies.
It will soon issue 300 billion yuan (HK$376 billion) in bonds to support infrastructure projects by local governments, and plans to raise a combined 1trillion yuan via debt offerings in the next three years to fund a new public works, such as railways and projects to alleviate poverty.
Economic analysts said the closed-door leadership talks in Beidaihe would set the tone for major second-half policy moves.
All eyes will be on the premier, the first Chinese leader to hold a doctorate in economics, because the Beidaihe gathering will focus on economic issues.
"Leaders must work out a feasible and effective plan to spur growth," Liu said.
"Following the four interest rate cuts, it seems unnecessary to further loosen monetary policies, but a strong enforcement is badly needed."
In past months, Beijing has introduced incentives ranging from eased customs procedures to boost exports to plans for renovation of urban water pipelines.
However, morale of corporate executives remains weak as many small privately owned companies are still facing difficulties in securing bank loans for business improvements and executing orders from customers.