China’s trade surplus widens as imports decline

Sep 10, 2012 12:00 AM

China’s trade surplus widened to $ 26.7 bn in August as imports registered a surprise fall, data showed, fuelling expectations of a new round of stimulus measures.
The figures, which came a day after downbeat industrial data, highlight waning strength in the world’s second-largest economy, as the broader global slowdown and the European debt crisis drag on exports. Overseas shipments increased 2.7 % year-on-year in August to $ 178 bn, the General Administration of Customs said. Imports fell 2.6 % to $ 151.3 bn.

The increase in exports in August outpaced the 1 % gain registered in July and was also slightly better than the 2.5 % increase forecast in a survey of economists by Dow Jones Newswires, though it is far below the kind of growth China has experienced in recent years.
The decline in imports, meanwhile, came as those economists had expected a 3.4 % rise and follows two straight months of slowing growth.

GDP growth
Gross domestic product in China, a key engine of the global economy, grew 7.6 % in the second quarter through June, its worst performance in three years. The government is targeting full-year expansion of 7.5 % this year, though that is well below the 9.3 % recorded in 2011 and the 10.4 % in 2010.
The decline in imports “reinforces our view that China is heading to an economic hard-landing,” Shen Jianguang of Mizuho Securities Asia said in a report, adding more stimulus is likely soon.

The figures are the latest in a string of weak data that has confirmed a deepening slowdown in China’s economy. Official data showed industrial output growth weakened in August to its slowest pace in more than three years.
Production increased just 8.9 % year-on-year — the lowest since a similar rise of 8.9 % in the depths of the global economic crisis in May 2009.

Hope of further action
Lu Ting, China economist at Bank of America Merrill Lynch, also said that the worsening situation is likely to tip Chinese authorities towards further action.
“With a worsening growth outlook and muted inflation pressure, we expect the government to take more action to support growth,” he said in a report. Lu added that such efforts will likely focus on improvements to urban infrastructure and increasing the supply of land as well as two additional cuts by the central bank to reserve ratio requirements for banks and the easing of some curbs on lending.

Lowering reserve ratios
China has already taken steps this year to stimulate growth by cutting interest rates twice in quick succession and slashing the amount of funds banks must keep in reserve as methods to stimulate lending. But a slight acceleration announced in consumer price inflation, which rose 2 % in August, has led to speculation the People’s Bank of China will be reluctant to slash borrowing costs again soon.
“The possibility of cutting interest rates within this year has greatly decreased, though there is still room to lower reserve ratios,” the China Securities Journal, a state-run newspaper, said in a commentary.

The government is now also pushing other measures to bolster the economy. State media reported the approval of an infrastructure package worth more than yuan 1 tn, involving 55 projects ranging from subway lines to highways.
China carried out a massive yuan 4 tn fiscal stimulus package in the wake of the global financial crisis in 2008.

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