China’s foreign trade tumbles 10.8 pct in Jan.

 

 

 

Workers try to load cargoes for export at a port in Lianyungang City, east China’s Jiangsu

Province, on February 1, 2015.   Photo by Geng Yuhe

 

 

 

 

BEIJING  |   2015-02-08 16:52:14

 

China’s foreign trade

tumbles 10.8 pct in Jan.

 

 

By Zhang Xu, Wang Xi and Wang Youling

 

 

China’s foreign trade tumbled in January as major data experienced routine decline ahead of the upcoming Chinese lunar New Year, or Spring Festival.

The total trade volume stood at 2.09 trillion yuan (341.16 billion U.S. dollars) last month, down 10.8 percent year on year, the General Administration of Customs (GAC) said on Sunday of February 8.

Exports dropped 3.2 percent to 1.23 trillion yuan and imports slumped 19.7 percent to 860 billion yuan, making the trade surplus expand 87.5 percent to 366.9 billion yuan, according to the GAC data.

“Spring Festival impacts foreign trade data at the beginning of every year,” the GAC said in a press release.

The festival, an important time for family reunions, occurs in January or February along with a 40-day travel rush. It is due on Feb. 19 and the rush is estimated to cover 2.8 billion trips this year.

“The trade data always turns out discouraging at every year’s beginning because of the Lunar New Year,” Liu Xuezhi, a financial researcher with the Bank of Communications, explained. “The data thereafter can reflect the real situation of China’s foreign trade.”

He said withering exports, especially of labor-intensive industries, reveal the weakening advantage in formerly-dominant areas.

Labor-intensive industries including Machinery, garments, textiles, shoes, toys, furniture and plastics exports all saw remarkable drops last month.

He attributed the sharp decrease in imports to lower price of bulk commodities and ongoing industrial upgrades while phasing out overcapacity.

Li Jian, a researcher with the Ministry of Commerce, said the contraction in exports is partly caused by different economic situations of China’s major trade partners.

He said the stable economic recovery of the United States can not offset the negative effects from the floundering Europe Union (EU), Japan and some emerging economies.

The GAC data showed that China’s exports to the EU and Japan dropped 4.4 percent and 20.4 percent, respectively. Even exports from the mainland to Hong Kong contracted more than 10 percent in January.

Except for the slight import growth of 0.7 percent from China’s Taiwan to the mainland, the imports from the other nine largest trade partners all ended in decline, the GAC said.

However, analysts forecast China’s 2015 foreign trade will realize steady growth through a better trade environment and stronger policy supports for the “Belt and Road” initiatives, construction of more free trade zones and cross-border e-commerce, but risks and challenges remain.

They believe exports will face downward pressure in Q1 and the start of Q2, considering the disappointing result of GAC’s latest survey of export companies and the further reduction in new export orders in last month’s manufacturing purchasing managers’ index (PMI).

The index, a key measure of factory activity in China, posted at 49.8 in January, fell below 50 for the first time since October 2012, while the new order index was 48.4, also lower from December’s 49.1.

A reading above 50 indicates expansion, while a reading below 50 represents contraction.

GAC head Yu Guangzhou said the country will further balance the quality and quantity of export expansion with more policy support for competitive products and new industries, so as to improve the role of Chinese enterprises in the global value chain.

Meanwhile, the State Council, China’s cabinet, has given the go ahead for GAC to release its trade data using yuan-denominated figures for this year.

Before 2014, the GAC mainly used the U.S. dollar in its trade data releases. It started to use both the dollar and yuan to denominate all trade figures in 2014 in an effort to promote the expanded use of yuan.

 

 

 

 

File photo taken on December 8, 2014 shows workers installing a subway for export to Brazil

in CNR Changchun Railway Vehicles Co., Ltd in Changchun, capital of northeast China’s Jilin

Province.   Photo by Xing Guangli

 

 

 

 

 

 

NEWS ANALYSIS  |  2015-02-09 20:35:15

 

China’s Jan. trade tumble

may prove short-lived

 

By Zhang Zhengfu

 

 

A trade tumble in China in January has sparked concerns about one of the main growth engines of the world’s second-largest economy. However, economists say the data is “distorted” and the sharp contraction of exports and imports may prove short-lived.

Trading in January proved much weaker than expected, with exports falling by 3.2 percent and imports plunging 19.7 percent, General Administration of Customs (GAC) data showed on Sunday of February  8.

But UBS economist Wang Tao said the headline readings are “on the surface too misleading to provide an accurate assessment of trends to come in the year ahead.”

Other economists interviewed by Xinhua forecast China’s 2015 foreign trade would grow steadily thanks to a better trade environment, stronger policy support for the “Belt and Road” initiatives, the establishment of more free trade zones and booming cross-border e-commerce.

Despite the disappointment of the headline figures, external demand and underlying export growth stayed largely firm, and imports remained anemic but did not collapse, Wang stressed.

Wang said UBS maintains its 2015 China trade forecasts, which predict export growth of 7.5 percent and import growth of 3 percent for the whole year.

For imports, which fell 19.7 percent from a year earlier, the largest drop in more than five years, Wang said slumping global commodity prices took a heavier toll on import growth.

Liu Xuezhi, a researcher with the Bank of Communications, attributed the sharp decrease in imports to sharp decline in commodities prices, ongoing industrial upgrades and efforts to phase out overcapacity.

Concerning exports, Wang attributed the deterioration to “temporary distortions from a base effect and Chinese New Year, along with the USD’s large movement against other currencies.”

Last year’s high base may have cut around 2 to 3 percentage points from headline annual growth of exports for China, according to UBS.

Volatile Chinese New Year effects, which are hard to predict and quantify accurately, probably further dragged down headline growth of exports, as the peak of pre-Chinese New Year trade activity may not occur until early to mid-February, said Wang.

The festival, an important time for family reunions, occurs in January or February along with a 40-day travel rush. It is due on Feb. 19 and the rush is estimated to involve 2.8 billion trips this year.

January’s sharp deterioration in exports doesn’t quite square with the fundamentals of China’s external demand, which seems to have remained largely solid, according to a research note written by Wang.

The U.S. non-manufacturing ISM index edged higher and January’s employment report pointed to ongoing labor market improvements, while business confidence in Europe has kept climbing, partially boosted by its QE program.

The Euro has been depreciating against the U.S. dollar by a larger margin than the renminbi against the U.S. dollar, resulting in real depreciation of the renminbi against the euro and denting the price advantages of Chinese product, said Ding Chun, a research fellow at Shanghai-based Fudan University.

However, the European economy is poised to recover in the second half of this year, which will boost China’s export to Europe, Ding said.

In addition, government policies will also help support export growth.

GAC head Yu Guangzhou said the country will further balance the quality and quantity of export expansion with more policy support for competitive products and new industries, so as to improve the role of Chinese companies in the global value chain.

 

 

 

 

 

 

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