Business / Economy

Chinese exports slump, outlook worrying

(Xinhua) Updated: 2016-03-08 18:28

BEIJING - China's exports slumped more than expected in February, as weak global demand and seasonal factors added to pressure on the slowing economy, customs data showed on Tuesday.

Exports in dollar-denominated terms were more than 25 percent lower than in February 2015, worsening from the 11.2-percent decline in January and the sharpest drop since May 2009, according to figures from the General Administration of Customs (GAC).

In yuan-denominated terms, exports slumped 20.6 percent year on year to 821.8 billion yuan ($126.3 billion) in February, a steeper fall than 6.6 percent in January.

The data is "ringing alarm bells on the state of the factory sector," said Tom Orlik, chief Asia economist at Bloomberg.

Business inactivity around the Spring Festival holiday, which fell in early February this year, overstated the year-on-year export slump.

"Even so, looking at a year-to-date figure for the first two months of the year, the picture is only slightly less gloomy," Orlik wrote in a research note.

In the Jan-Feb period, exports in yuan-denominated terms went down 13.1 percent year on year to 1.96 trillion yuan, the GAC data showed. Imports dropped 11.8 percent to 1.35 trillion yuan, while total foreign trade was 12.6 percent lower than a year earlier at 3.31 trillion yuan.

HSBC chief China economist Qu Hongbin said the February export decline was steeper than market expectations, citing sagging external demand as the main reason.

Meanwhile, he attributed the milder import decrease to stabilizing commodity prices, noting that domestic demand remains subdued.

Imports in February dropped 8 percent to 612.3 billion yuan, improving from the 14.4-percent fall a month earlier. In dollar terms, the contraction in imports also narrowed from 18.8 percent in January to 13.8 percent.

Exports were once a major driver for China's economy but became a drag on growth after the global financial crisis sapped demand.

Dented by flagging trade, cooling property investment and an industrial glut, China's economy expanded in 2015 by just 6.9 percent, its slowest pace in 25 years.

Orlik said he expected exports to remain weak, as the latest manufacturing indicators have shown orders contracting.

The purchasing managers' index showing China's manufacturing activity fell to its lowest level in four years in February, with the sub-index for new orders down, according to an official survey.

Slumping exports led to a 43.3-percent year-on-year contraction in the monthly foreign trade surplus in February, which was down from 406.2 billion yuan in January to 209.5 billion yuan, according to the GAC.

Total foreign trade value in February fell 15.7 percent year on year to 1.43 trillion yuan, widening from the 9.8-percent decline seen in January.

China's foreign trade will probably continue to lose steam in the second quarter of the year as global economic fundamentals are unlikely to improve, according to analysis by investment firm China International Capital Corp.

In regional breakdown, China's trade in yuan-denominated terms with its biggest trade partner, the European Union, dropped 9.7 percent year on year in the first two months of 2016.

In the same period, trade with the United States, China's second-biggest trade partner, declined by 12.2 percent and that with the Association for Southeast Asian Nations, the third-largest trade partner, dipped 14.9 percent.

The February trade data pointed to an increasingly worrying lack of demand for Chinese exports, which is likely to put further pressure on domestic production, according to a research note from HSBC.

"With risks to growth on the downside, and little support from external demand, a more decisive stimulus package targeted at lifting domestic demand and countering deflation is warranted," according to the note.

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