WEAKNESSES IN CHINA’S TRADE

SLOWDOWN IN CHINA’S TRADE ‘POINTS TO REAL WEAKNESS’

Weaker exports than expected and stalling headline import growth signal that government spending is the crucial factor keeping the economy moving

Allen Wang and Nick Edwards (Reuters)

Business Day, May 11, 2012

China risks a fresh downturn in demand for goods from its huge factory sector, with weaker exports than expected and stalling headline import growth signalling that government spending is the crucial factor keeping the economy moving.

Annual growth in imports last month was just 0,3%, far below forecasts of an 11% increase, while exports managed growth of just 4,9% versus expectations of 8,5%, customs data released yesterday showed.

"We know the external climate is not particularly conducive to strong export growth and digging into the data you can see primarily it is a euro-zone story, which is to be expected," Alistair Thornton, China economist at IHS Global Insight in Beijing, said yesterday.

"But the headline number on import growth is less expected and more worrying. It does point to a real weakness in the domestic economy and shows that we have not yet turned the corner into a sustained recovery."

The risks to China’s factory-focused economy of weakness in private sector final demand were underscored by a drop-off in shipments from Asian economies that feed China’s export-oriented assembly lines, while robust imports from Australia and solid annual volume growth in raw material imports indicate that state-led infrastructure spending underpins economic activity.

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