China Fe­bru­ary ex­ports post worst fall since May 2009

The Pak Banker - - 6BUSINESS -

China's Fe­bru­ary trade per­for­mance was far worse than econ­o­mists had ex­pected, with ex­ports tum­bling the most in over six years, days af­ter top lead­ers sought to re­as­sure in­vestors that the out­look for the world's sec­ond­largest econ­omy re­mains solid.

Ex­ports fell 25.4 per­cent from a year ear­lier, twice as much as mar­kets had feared as de­mand skid­ded in all of China's ma­jor mar­kets, while im­ports slumped 13.8 per­cent, the 16th straight month of de­cline.

The ex­port drop was the big­gest since May 2009, but econ­o­mists said it may not nec­es­sar­ily point to a sig­nif­i­cant wors­en­ing in eco­nomic con­di­tions due to sharply re­duced busi­ness ac­tiv­ity dur­ing the long Lu­nar New Year hol­i­days, which fell in early Fe­bru­ary this year.

Still, Jan­uary-Fe­bru­ary ex­ports on a com­bined ba­sis, which should iron out some of the hol­i­day ef­fect, fell 17.8 per­cent and im­ports 16.7 per­cent, point­ing to per­sis­tently weak de­mand at home and abroad that is weigh­ing on the econ- omy of the world's largest trad­ing na­tion.

"Ex­ports were very strong last year in Fe­bru­ary be­cause the Lu­nar New Year started so late and much of the usual dis­rup­tion from the hol­i­day was pushed into March. So the im­pli­ca­tion is that we'll prob­a­bly see a sig­nif­i­cant re­ver­sal and a stronger num­ber next month," said Ju­lian Evans-Prichard, China Econ­o­mist at Cap­i­tal Eco­nom­ics in Sin­ga­pore.

"We sus­pect that over­all ex­ports re­main weak but we don't see much ev­i­dence of marked de­te­ri­o­ra­tion, for in­stance there was no sud­den drop-off in ex­port or­ders in the Markit PMI (ac­tiv­ity sur­vey), and they gen­er­ally do a pretty good job of ad­just­ing for sea­son­al­ity." An­a­lysts polled by Reuters had ex­pected Fe­bru­ary ex­ports to fall by 12.5 per­cent, with im­ports seen down 10.0 per­cent.

China posted a trade sur­plus of $32.59 bil­lion for the month, down from $63.29 bil­lion in Jan­uary, the Gen­eral Ad­min­is­tra­tion of Cus­toms said on Tues­day.

Af­ter miss­ing trade goals re­peat­edly in re­cent years, China's lead­ers did not give an es­ti­mate for trade growth in 2016 when they set out key eco­nomic tar­gets in par­lia­ment on Satur­day, re­flect­ing deep un­cer­tainty about global de­mand.

Com­merce Min­is­ter Gao Hucheng said last month that he was con­fi­dent that China's trade con­di­tions would sta­bi­lize and im­prove in 2016, though most an­a­lysts see no im­prove­ment in sight.

"The sharp drop in im­ports also shat­ters the hope that China is rolling out a stim­u­lus pack­age that would boost the de­mand for com­modi­ties," said Zhou Hao, se­nior emerg­ing mar­kets econ­o­mist at Com­merzbank in Sin­ga­pore. "The re­cent rally in bulk com­modi­ties, led by iron ore, might be only short-lived."

Spot iron ore prices rock­eted nearly 20 per­cent to the high­est in more than eight months on Mon­day, buoyed by ex­pec­ta­tions that Chi­nese steel mills are plan­ning an out­put boost ahead of an ex­pected crack­down on air pol­lu­tion. China's iron ore im­ports rose 6.4 per­cent in Jan-Feb, though anti-dump­ing mea­sures are squeez­ing steel­mak­ers who are try­ing to keep mills run­ning by in­creas­ing sales over­seas.

Gold­man Sachs, how­ever, said the iron ore rally would not last in the ab­sence of a sig­nif­i­cant im­prove­ment in Chi­nese do­mes­tic steel de­mand, stick­ing to its bear­ish take on one of this year's big­gest com­mod­ity come­backs.

China's lead­ers set an eco­nomic growth tar­get of 6.5 per­cent to 7 per­cent for 2016 as they opened the an­nual ses­sion of par­lia­ment last week, com­pared with 6.9 per­cent last year, the coun­try's slow­est ex­pan­sion in a quar­ter of a cen­tury

As part of ef­forts to stim­u­late ac­tiv­ity, pol­i­cy­mak­ers have pro­posed rais­ing the 2016 fis­cal deficit to 3 per­cent of gross do­mes­tic prod­uct, from 2015's bud­geted 2.3 per­cent. Econ­o­mists also ex­pect fur­ther re­duc­tions this year in in­ter­est rates and the amount of money that banks must hold in re­serve, ex­tend­ing a year-long stim­u­lus blitz.

In late Fe­bru­ary, the cen­tral bank cut bank re­serve ra­tio re­quire­ments, re­leas­ing an es­ti­mated $100 bil­lion in cash for lend­ing. "Over­all, to­day's trade data, to­gether with high-fre­quency data and lead­ing in­di­ca­tors, sug­gest that growth mo­men­tum weak­ened fur­ther in Jan­uary-Fe­bru­ary," econ­o­mists from Ja­panese bank No­mura said in a re­search note.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.