Slump in Trade Puts Heat On China

The Wall Street Journal Europe - - Front Page - BY MARK MAG­NIER

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.”


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