China’s ex­ports de­cline as trade sur­plus swells to record

The Pak Banker - - BUSINESS -

A slide in China's ex­ports in Jan­uary was eclipsed by an even big­ger tum­ble in im­ports, leav­ing a record trade sur­plus for the world's big­gest trad­ing na­tion.

Over­seas ship­ments de­clined 11.2 per­cent in Jan­uary in U.S. dol­lar terms from a year ear­lier, the cus­toms ad­min­is­tra­tion said on Mon­day, com­pared with a 1.4 per­cent drop in De­cem­ber. Im­ports ex­tended a stretch of de­clines to 15 months, tum­bling 18.8 per­cent, leav­ing a record trade sur­plus of $63.3 bil­lion.

The slide in ex­ports sug­gests the yuan's de­pre­ci­a­tion since Au­gust has yet to re­sult in a sus­tained boost to the com­pet­i­tive­ness of China's fac­to­ries. While the de­cline in ship­ments to and from most ma­jor des­ti­na­tions raises con­cern of a lin­ger­ing trade slow­down, the read­ings may also be in­flu­enced by the tim­ing of China's week-long Lu­nar New Year hol­i­day and volatil­ity in trade flows with Hong Kong.

"Taken at face value th­ese num­bers are a neg­a­tive sign for the Chi­nese econ­omy," said Shane Oliver, head of in­vest­ment strat­egy at fund man­ager AMP Cap­i­tal In­vestors Ltd. in Syd­ney. "But Chi­nese eco­nomic data is tra­di­tion­ally very volatile around Jan­uary re­flect­ing the float­ing tim­ing of the Chi­nese new year and they may also re­flect a cor­rec­tion to pos­si­ble over-in­voic­ing and dis­guised cap­i­tal out­flows that could have boosted the De­cem­ber data."

China's yuan surged by the most in more than a decade, catch­ing up with dol­lar de­clines dur­ing a week-long hol­i­day, af­ter the cen­tral bank chief voiced sup­port for the cur­rency and set its fix- ing at a one-month high. The slide in ex­ports un­der­scores the fragility of global de­mand and sig­nal that pol­icy mak­ers may ac­cel­er­ate fis­cal and mon­e­tary eas­ing, ac­cord­ing to Field­ing Chen, an econ­o­mist at Bloomberg In­tel­li­gence in Hong Kong. The Peo­ple's Bank of China has held the main rate at a record low since Oc­to­ber. "Weak ex­ports pose a fur­ther down­side risk to the weak econ­omy, sug­gest­ing the govern­ment may need to step in more quickly with pol­icy sup­port to shore up do­mes­tic de­mand," Chen wrote in a re­port Mon­day. "In par­tic­u­lar, pol­icy mak­ers may want to amp up fis­cal stim­u­lus as soon as pos­si­ble in or­der to bol­ster in­vest­ment and con­sump­tion."

China's econ­omy con­tin­ues to give mixed sig­nals. While ar­eas like con­sump­tion and ser­vices show signs of hold­ing up, the man­u­fac­tur­ing sec­tor re­mains in the dol­drums. Retail sales over the Spring Fes­ti­val hol­i­day rose 11.2 per­cent from the same va­ca­tion pe­riod a year ear­lier, with cin­e­mas post­ing sharp in­creases in box-of­fice sales, the coun­try's Min­istry of Com­merce said in a state­ment Satur­day. A fuller read­ing on how China's econ­omy has started 2016 won't be avail­able un­til next month, when fresh read­ings on retail sales, in­vest­ment and in­dus­trial out­put are due.

"This shows that if China wants to de­liver a 6.5 to 7 per­cent growth tar­get this year they have to rely on do­mes­tic de­mand," said Larry Hu, head of China Eco­nom­ics at Mac­quarie Se­cu­ri­ties Ltd. in Hong Kong. "Ex­ports are likely to grow zero per­cent this year and prop­erty in­vest­ment by zero to 5 per­cent. They need to come out with a big­ger in­fra­struc­ture pack­age to in­vest."

A busi­ness­man cy­cles past the Bank of Ja­pan (BOJ) head­quar­ters in Ja­pan.

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