Beijing — China’s export growth slowed sharply in September while imports also unexpectedly decelerated, undershooting forecasts by big margins and suggesting manufacturers are slashing prices to move inventory before tariffs from several trade partners.
Export momentum had been one bright spot for the Chinese economy that has struggled to gain traction due to weak domestic demand and a property market debt crisis, adding to the urgency for stronger stimulus.
Outbound shipments from the world’s second-largest economy grew 2.4% year on year last month, the slowest pace since April, customs data showed on Monday, missing a forecast 6% increase in a Reuters poll of economists and an 8.7% rise in August.
Imports edged up 0.3%, missing expectations for a 0.9% rise and softer than 0.5% growth previously. The weak data does not bode well for exports in coming months as just less than a third of China’s purchases are parts for re-export, particularly in the electronics sector.
“Export growth slowed last month but remained resilient, with volumes still rising at a double-digit pace,” Zichun Huang, China economist at Capital Economics said. “Further ahead, though, growing trade barriers are likely to become an increasing constraint.
“The pivot towards monetary easing should also help support demand among China’s trade partners. But China’s export success is prompting increasing trade restrictions from other countries, which threatens to dampen longer-term export growth,” she added.
Surplus narrowed
A European Commission motion to impose additional duties on electric vehicles built in China of up to 45% was passed on October 4 in a divided vote of EU member states, joining the US and Canada in tightening trade measures against China.
China’s overall trade surplus narrowed to $81.71bn in September from $91.02bn in August and missed a forecast of $89.8bn.
Manufacturing activity shrank sharply in September, according to a recent factory owners’ confidence survey, with new export orders falling to their worst in seven months.
Analysts have attributed previous months’ strong export performance to factory owners slashing prices to find buyers.
“Export growth in the fourth quarter is still likely to remain positive, but in the context of slowing external demand, the downside risk of exports is large,” said Wang Qing, chief macro analyst at Oriental Jincheng, adding that manufacturing activity was way below the average for the past 10 years.
Last week, the head of China’s state planner said he was “fully confident” of achieving the government’s full-year growth target of about 5%.
On Saturday, Chinese officials announced plans to ramp up debt issuance to aid local governments in managing their debt problems and provide increased support to low-income earners. However, they did not state the size of the fiscal stimulus at the highly anticipated news conference, disappointing markets.
Analysts anticipate it will take a long time to restore consumer and business confidence and get the $19-trillion economy on a more solid footing. A housing market recovery, in particular, could be a long way off.
“The change of fiscal policy stance as indicated by the press conference at the weekend is critical as a pillar for growth next year,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“Looking ahead it would be difficult to sustain strong export growth into next year, as trade tension heightens.”
Reuters
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