Unexpected drop in China's imports and exports
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BEIJING: Chinese exports registered their largest drop in nearly a decade last month, suggesting that the global recession could be far worse than many economists had previously predicted.
According to statistics released by the Chinese government Wednesday, exports fell 2.2 percent from November 2007 to November 2008 — the largest year-over-year monthly decline since April 1999.
Even at a time of increasingly dour economic news, the Chinese trade numbers stunned many economists. They struck an ominous note for China, where labor unrest has increased markedly as the economy has slowed in the last month.
Many analysts had anticipated that the monthly trade figures would show China's export machine slowing along with the global economy, but few had expected it to slip into reverse. In October, exports surged 19.2 percent year-over-year.
"We were expecting a slowdown, but the magnitude is a bit shocking," said Wang Tao, an analyst at UBS Securities.
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Most worrisome, China's economic dynamism of the last 20 years has been powered by the twin engines of exports and foreign investment. But in other sobering news, the government said that direct foreign investment fell 36.5 percent from a year earlier in November.
In recent months, evaporating export demand had already forced thousands of factories to close in the Pearl River Delta of Southern China. Tens of thousands of jobs have disappeared, leading to protests by unemployed workers demanding back pay.
Late last month, President Hu Jintao warned that the global financial crisis was threatening to undermine three decades of head-spinning expansion. "China is under growing tension from its large population, limited resources and environmental problems, and needs faster reform of its economic growth pattern to achieve sustainable development," he said in a speech published in the Communist Party newspaper, People's Daily.
Analysts say the sharp export slowdown could make it more difficult for Beijing to stimulate the economy, and could lead to the closure of more factories in coastal areas.
China's slowing exports will also be another sharp blow to global growth. Together the trade figures strongly suggest that China will not be a savior to the global economy, taking up the slack from the slumping United States, Europe and Japan, as some had hoped. Indeed, when combined with further signs of a slowing economy in Japan, the picture of Asia, once the fastest-growing continent, becomes one of spreading economic gloom.
Slowing exports will put added pressure on the Chinese government. Already the stock market and real estate markets have plummeted, industrial production is in decline and thousands of factories are being closed.
Just last month, officials in Beijing announced a $586 billion stimulus package. In recent weeks, the government has also slashed interest rates, cut taxes on stock trades and announced other measures aimed at lifting domestic consumption, in the hopes that it will replace falling exports.
Imports to China also plunged sharply last month, falling 17.9 percent and widening China's trade surplus to a record $40 billion, from $35.2 billion in October.
After the trade figures were released, China National Radio reported that the government was vowing to expand spending and cut taxes further next year in an effort to spur job creation and bolster agriculture, social security, education and small and medium-size enterprises.
Beijing will also seek to ensure "healthy and stable" growth of the nation's property markets, which have slowed greatly in recent months.
But with leaks springing up all over China's economy, it is unclear where the government can hold back economic, and potentially political, upheaval.
The government's decision in recent weeks to allow the Chinese currency, the yuan, to fall against the dollar after a long period of appreciation seems to be a signal that the government is moving to shore up its exporters, by making their goods cheaper and, therefore, more competitive.
That — as well as China's increasing trade imbalance — could signal greater tension ahead with the United States. In the one piece of seemingly positive news, China's producer price index, a measure of inflation at the factory level, fell to its lowest rate in two years, according to the government. That figure — 2 percent in November — rose 6.6 percent in October. In August, when that number hit 10.1 percent, the government was focused on stemming the threat of inflation and moderating China's breakneck growth.
In just four months, the situation has changed startlingly. And lower imports suggest falling demand and greater consumer and business fear.
Exports, meanwhile, are a mainstay of China's economy; by one measure they make up 40 percent of gross domestic product. While some experts dispute that figure and question other official economic statistics from Beijing, analysts say the slumping demand for Chinese goods is likely to pull down the nation's growth rate, which was 9 percent in the third quarter, close to or even below the 7 percent figure that many Chinese economists contend is the minimum for maintaining social stability.
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