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AMID GREEN SHOOTS, CHINA'S EXPORTS STILL BARREN

Tina Wang

Forbes, May 12, 1009

China's exports plunge continues to be worse than expected, impeding recovery for the first major economy to emerge from the global slump. Marking the sixth straight month of declines, April exports tumbled 22.6% from a year earlier, compared with the market consensus forecast of 18.0% and March's 17.1% drop.

China is still banking on a recovery in Western demand next year, as domestic consumption cannot rise fast enough to make up for the exports shortfall. Though the worst of the exports slowdown appears to be past, China risks a "double-dip" in GDP growth next year if that Western rebound doesn't materialize, some economists say. Some of April's steep exports drop could be attributed to lingering effects of the Chinese New Year though, Goldman Sachs noted.

Meanwhile, fixed asset investment grew by 33.9% in April from a year earlier, compared with 30.3% in March. Infrastructure spending on the back of Beijing's stimulus package and record bank lending has been a key reason analysts now expect China to hit its official 8% growth target. But beyond railway expansion and housing construction, policy-driven investment could be propping up manufacturing and industrial capacity that the market doesn't want. The spring China Import and Export Fair, which ended last week, saw orders fall 17% from the fall fair, according to J.P. Morgan.

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