Slump in Trade Puts Heat On China
BEIJING— China’s worsening export performance is expected to strengthen Beijing’s commitment to doing more to shore up flagging growth in the world’s second- largest economy.
On Tuesday, China reported its largest monthly drop in exports since the financial crisis. The customs administration said exports in February fell 25.4% in dollar terms yearoveryear, compared with a drop of 11.2% in January. While trade flows were affected by February’s long Lunar New Year holiday, the decline was sharply lower than economists had forecast.
Imports also declined, falling 13.8% last month, the agency reported, compared with an 18.8% drop in January, in a further cooling of demand in China that is affecting its Asian neighbors. China’s trade surplus narrowed sharply in February to $ 32.59 billion from $63.29 billion in January.
The worse- than- expected trade results dovetail with other data signaling an economy facing more choppiness ahead, economists said.
“China’s exports declined more than expected in February, confirming our view that external trade will likely be a
drag on economic growth in 2016 amid lackluster global demand,” said Mizuho Securities Asia Ltd. economist Jianguang Shen, in a research note. “Government stimulus to boost domestic activity will be critical for stabilizing economic growth in 2016.”
China has started the year on a weak footing after gross domestic product growth slowed to 6.9% last year, its weakest pace in a quarter-century.
At Saturday’s opening of the national legislature’s annual session, which runs through mid- March, Premier Li Keqiang pledged to ensure the economy grows 6.5% this year, saying the government will use infrastructure spending, tax cuts, monetary policy and a higher budget deficit.
“GDP has become China’s ‘ whatever it takes’ line,” said Evan Lucas, an analyst with IG Markets Ltd.
China’s latest export figures follow a call by senior officials from the Group of 20 major economies in Shanghai last month for coordinated efforts to spur global growth.
China’s poor data fit with trade results from other exporters in the region.
At the meeting, Beijing pledged to avoid a significant depreciation in its currency to bolster exports.
China’s poor data fit with trade results from other exporters in the region. Last month, Taiwan’s exports fell for the 13th- straight month— the island’s longest export slump since the global financial crisis— while South Korean exports declined for the 14th consecutive month. China’s February results were the weakest since May 2009, when exports fell 26.4%.
Sun Sandy, sales manager at Yancheng Shunyu Agricultural Machinery Co. in the eastern city of Yancheng, said the global environment has made it tougher to export the firm’s tractor parts to Europe, the U.S., Africa and Southeast Asia.
“Exports aren’t doing well right now,” she said. “We’re really hoping for some sort of breakout.”
At the legislature, Mr. Li also pledged to promote exports, speed up payment of tax rebates for exporters and otherwise improve conditions for a part of the economy that once powered China’s growth but is now struggling.
Imports have been keenly watched by economists looking for evidence of capital flight cloaked as legitimate trade deals. Trade with Hong Kong has drawn particular scrutiny. In January, Chinese customs figures show China’s imports from Hong Kong increased 108%; Hong Kong data, however, show exports to China fell 7.9%.
Though their accounting differs, the figures should roughly match, and economists have said the discrepancy suggests that companies are inflating invoices to circumvent China’s capital controls. In February, China recorded an 88.7% rise in imports from Hong Kong. Hong Kong has yet to release February trade data.
Unlike in recent years, China didn’t issue a foreign trade target this year, a reflection of the diminished importance of exports and Beijing’s growing difficulty hitting the numbers after four years of falling short. Last year, China’s combined imports and exports declined by 8%, a 14-percentage-point gap below its target of 6% growth.
Ms. Sun, the agricultural equipment saleswoman, said she doesn’t expect many of the trade- promotion policies coming out of Beijing to benefit relatively small exporters like her company, which had sales of less than $ 1 million last year. Proposed changes from which she said her company would benefit are faster export rebates and streamlined customs inspections.
“The sooner, the better,” Ms. Sun said. “Some of these reviews are really a waste of time and money.”