Double-barrelled dip in China trade points to fragility of recovery
Exports fall 1.8 per cent in April, after seeing strong growth the month before, while imports continue their downward slump, dropping 10.9 per cent
China’s powerful export machine lost steam again last month after a surprisingly robust rebound in March, reflecting fragility in a debt-fuelled recovery in the world’s second-biggest economy.
Imports also continued to fall, despite noticeable price rises in commodities such as iron ore.
In US dollar terms, China’s overseas shipments fell 1.8 per cent in April from a year earlier, a sharp reversal from the 11.5 per cent yearly growth recorded in March. Imports fell 10.9 per cent, against a 7.6 per cent decline in March, according to data released by the customs administration on Sunday. As a result, China’s trade surplus in April surged to US$45.6 billion.
The double-barrelled dip showed “there’s no real improvement” in Chinese trade, Liu Dongliang, an analyst with China Merchants Bank, wrote in a research note. The extended decline in imports is an especially worrying sign of the nation’s economic health.
China’s domestic demand is still weak
“It showed China’s domestic demand is still weak, and it’s anything but a good sign for China’s economic stabilisation,” Liu wrote.
The large trade surplus may help explain the increases in China’s foreign exchange reserves.
The People’s Bank of China released data on Saturday showing the reserves added US$7 billion in April, the second monthly increase in a row.
The trade data came after the official purchasing managers index pointed to slightly weaker manufacturing activity than in March.
China manufacturing slows further in April despite stimulus: survey
The government is fine-tuning its macroeconomic policies after unleashing an all-time-high injection of bank credit to bolster growth in the first quarter.
“Financial stability may be regaining more weight in the policy agenda” of Chinese authorities, Nomura Securities economists led by Zhao Yang wrote in a research note last week.
The central bank said in its report on first-quarter monetary policy, released on Friday, that it would pay more attention to inflation, citing expected rises in housing prices and recent increases in commodities prices.
“The debt leverage ratio is rising at a relatively fast rate, and there are growing risks in the financial sector,” the central bank said. As such, China has to “unswervingly” push ahead with supply-side reform.
Yuan weakens after People’s Bank of China cuts fixing by the most in eight months
Measured in yuan terms, however, China’s exports rose 4.1 per cent in April from a year earlier, while imports fell 5.7 per cent, the customs administration said.
The agency added that China’s trade outlook might brighten in the second quarter, citing its own survey of Chinese trade managers.
