24 October 2016
China's export sales contracted 15 percent in March, compared with expectations for a 12 percent rise. Photo: Bloomberg
China's export sales contracted 15 percent in March, compared with expectations for a 12 percent rise. Photo: Bloomberg

China’s shock export fall deepens fears over slowing economy

China’s export sales contracted 15 percent in March while import shipments fell at their sharpest rate since 2009, a shock outcome that deepens concern about sputtering Chinese economic growth.

The tumble in exports compared with expectations for a 12 percent rise and could heighten worries about how a rising yuan has hurt demand for Chinese goods and services abroad, Reuters reported, citing analysts.

In a sign that domestic demand was also tepid, imports into the world’s second-biggest economy shrunk 12.7 percent last month from a year ago, the General Administration of Customs said on Monday.

That was the biggest slump in imports since May 2009, and compared with a Reuters poll forecast for an 11.7 percent drop.

“It’s a very bad number that was much worse than expectations,” Louis Kuijs, a Hong Kong-based economist at RBS, said of the export data.

“It leads to warning flags both on global demand and China’s competitiveness.”

Buffeted by lukewarm foreign and domestic demand, China’s trade sector has wobbled in the past year on the back of the country’s cooling economy, unsettling policymakers.

Chinese Vice Premier Wang Yang was quoted by Xinhua news agency as saying earlier this month that authorities must act to arrest China’s export slowdown lest it further dampens economic growth.

Wang said local governments should offer “preferential policy support” and encourage more private investment in exports.

Anemic growth in the trade sector could hurt jobs, which the government wants to protect for fear that widespread unemployment could fuel social discontent and trigger unrest.

So far, China’s labor market appears to be holding up well, despite signs that economic growth is steadily grinding to its lowest in a quarter of a century of around 7 percent.

The country’s first-quarter GDP data will be released on Wednesday.

Last month’s trade performance left China with a surplus of US$3.1 billion, much smaller than the poll forecast for a US$45.4 billion trade gap.

A breakdown of exports and imports by major markets was not yet available on Monday, though many economists said there were few doubts that a stronger yuan — which is pegged to a rising dollar — had crimped export sales.

Costs stemming from labor, financing and the exchange rate “remain stubbornly high and the competitive advantage of the traditional foreign trade has been weakened”, said Huang Songping, a spokesman at China’s customs office.

He said 56.2 percent of exporters surveyed by the government said their costs had risen in March.

Against the euro, for instance, the yuan hit a record high of 0.15274 euro on March 16, up 14 percent this year.

“The really weak trade surplus has implications for the weakness in the renminbi,” said Andrew Polk, an economist at the Conference Board in Beijing. “So we might see more weakness going forward.”

China grew its trade sector by 3.4 percent in 2014, according to government data, missing the government’s growth target of 7.5 percent by more than half.

Taking that disappointing outcome into account, the government has lowered its growth target for 2015 combined imports and exports to around 6 percent.

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