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China Exports Slump More Than a Quarter in February

March 8, 2016
Slowing expansion has already sent Chinese commodities prices plunging, battering other producer economies, and now the country’s exports turn in their worst monthly performance since May 2009.

BEIJING — China’s exports saw their heaviest fall in nearly seven years in February, diving more than a quarter as feeble global trade offset the weaker yuan and raised pressure on Beijing to ramp up domestic demand.

The below-forecast reading is the latest data to raise fears of a “hard landing” in China and comes days after Beijing cut its growth target for this year, while promising reforms and higher spending to boost the world’s No. 2 economy.

Customs figures showed exports sank 25.4% on-year to $126.1 billion last month, sharper than the 14.5% economists predicted in a Bloomberg News poll and the worst performance since May 2009 at the height of the global financial crisis.

China is the world’s biggest trader in goods and a key driver of international growth, but its firms have been battered by weak demand from major markets as the global economy stutters. In turn, its slowing expansion has sent commodities prices plunging, battering producer economies such as Australia.

Imports fell for the 16th consecutive month, plunging 13.8% to $93.6 billion, overshooting the Bloomberg forecast of a 12% slide.

Analysts with ANZ Research pointed to “weakening global trade” and “sluggish domestic demand” as factors driving the “disappointing” export and import results.

Customs said that “imports from and exports to major trade partners declined” in the first two months of the year, specifically noting a fall in exports of labor-intensive goods, including mechanical and electrical products and apparel. Imports of iron ore and crude oil increased in volume while decreasing in dollar value terms, it said, while coal and steel import volumes declined, adding that “prices of major imported commodities fell across the board.”

The trade data and other indications “suggest that growth momentum weakened further in January-February,” wrote Nomura analyst Zhao Yang. Beijing’s fiscal stimulus plans “cannot fully offset headwinds from slowing real estate and manufacturing investment.”

Investors were mixed on the data, with the benchmark Shanghai Composite Index falling as much as 3.27% during a volatile day of trading, but closing up 0.14%.

The sharp drop in overseas shipments — the eighth straight fall — came despite ongoing weakness in the yuan currency, which was devalued in August and January, fueling suspicions that Beijing is trying to make its exports cheaper, which it denies. 

The latest figures will “absolutely” reinforce depreciation pressure on the currency, Christopher Balding, professor of economics at Peking University’s HSBC Business School, told AFP. “You now have a year of pretty bad trade data, so at this point it is a trend. ... It’s clearly declining exports and declining imports.”

Michael Every, head of financial markets research at Rabobank Group in Hong Kong, said the statistics pointed towards more monetary and fiscal stimulus being needed, “and that will argue against the yuan stability China craves. … It’s another shocker.”

China’s leaders are meeting this week for the annual rubber-stamp National People’s Congress, where premier Li Keqiang set a growth target of 6.5-7.0% for this year.

He did not give a specific target for trade growth, after values fell last year, only aiming for “a steady rise in import and export volumes” and “a basic balance in international payments.”

Beijing is looking to recalibrate its economy from a dependence on exports and government spending to one driven by consumers at home, but what it calls the “new normal” has it growing at rates not seen in a quarter of a century, albeit still far higher than developed countries.

Chinese trade statistics are regularly questioned for being open to distortion by practices such as over-invoicing to disguise capital outflows, and Customs have launched a “National Gate Sharp Sword” campaign to crack down on false export reports.

By Benjamin Carlson

Copyright Agence France-Presse, 2016

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