Chinese export and import growth both slowed in June, showing that the world’s second-largest economy faces strong headwinds.
Exports rose 11.3 per cent from a year earlier, down from May’s 15.3 per cent pace. Imports increased 6.3 per cent from a year earlier, half of May’s 12.7 per cent and well below expectations.
With imports so weak, China was able to pull in a trade surplus of $31.7bn, nearly double May’s total and the country’s biggest in more than three years. The trade numbers followed inflation data that underscored the downturn in the Chinese economy.
Lu Ting, an economist with Bank of America Merrill Lynch, noted that exports were at least holding up far better than they did in late 2008, when global financial turmoil led to a sharp plunge in trade.
“That’s why we believe there is no need for panic and there will be huge stimulus,” he said.
Nevertheless, Mr Lu forecast that export growth was likely to dip below 8 per cent in the second half, below the growth rates of 20-30 per cent seen in recent years, depriving the economy of one important source of strength.
“We thus expect the government to introduce more policy easing measures to offset the slowdown in export growth,” he added.
The Chinese central bank last week cut interest rates, its second time in less than a month. The government has also started to accelerate approvals for new investment projects and Wen Jiabao, the premier, vowed at the weekend that the government would take additional policy actions to shore up growth.
If Beijing will be pleased to see that exports have not collapsed, other nations, especially producers of commodities, will fret about the weakness in Chinese imports.
Zheng Yuesheng, head of the statistics department of the Chinese customs administration, said falling commodity prices reduced the overall value of China’s imports, but the main explanation for the sluggish imports was domestic.
“Our economy is independently slowing and domestic demand is weakening. This is suppressing imports,” he said at a news conference.
Dariusz Kowalczyk, economist with Crédit Agricole CIB, said imports of oil, steel and copper scrap all fell in volume terms.
“This confirms the slowdown of investment, and bodes very poorly for global prices of oil and steel,” he said. “However, as stimulus revives capital spending, we expect a recovery of such imports in the second half.”
Copyright The Financial Times Limited 2012