Weak China data confirms outlook worsening
Beijing, September 10, 2012
China's exports grew at a slower pace than forecast in August while imports fell, underlining the mounting challenge facing Beijing's policymakers as domestic demand flags while the global economic outlook darkens.
Exports grew 2.7 per cent year-on-year last month, below the 3 per cent forecast in a Reuters poll, confirming President Hu Jintao's warning of the "grave challenges" posed by the world economy.
Data for imports was even worse, showing a fall of 2.6 per cent on the year in August, compared with expectations for a 3.5 per cent rise. The number will solidify market expectations for further stimulus and monetary easing to support growth as China heads towards a once-a-decade leadership change later this year.
"The import surprise on the downside is very unusual. It is an alarming sign for the government and they probably saw it coming," said Zhang Zhiwei, chief China economist at Nomura in Hong Kong.
"We've now pretty much got the full batch of August data and it's clear that the slowdown pressure is growing and that the government is feeling the need to act. I think there will be further easing in the months ahead."
Such weak data is grim news in a country where exports generate 25 per cent of gross domestic product, support an estimated 200 million jobs and where analysts already expect the economy to have its weakest year of expansion since 1999.
Some economists fear the outlook is so poor that China may miss its official 7.5 per cent growth target for 2012 without a fresh round of swift policy stimulus on top of the monetary and fiscal easing undertaken since last year and the $150 billion-worth of infrastructure projects announced last week.
Those fears were amplified by data on Sunday showing industrial output growth hit its weakest annual pace in August in more than three years.
The problem for Beijing is that despite deep government pockets, record tax receipts, a budget in surplus in the first half of the year and monetary policy still on the tight side, even with inflation near two-year lows, there is little policymakers can do to stimulate demand beyond their borders.
China's biggest customers are the debt-ridden, recession-bound European Union and the still struggling United States.
Without a big boost in demand from those two economies, Beijing policymakers face an uphill battle.
The focus of investors has clearly shifted though to more aggressive efforts to stimulate domestic activity to compensate for declining external demand.
They are worried that six successive quarters of slowing growth risk sliding into a seventh in the third quarter despite the "fine-tuning" of economic policies which began in November 2011.
Two interest rate cuts, the freeing of an estimated 1.2 trillion yuan ($190 billion) for new lending by cutting required reserve ratios (RRR) at banks and a raft of tax tweaks have so far failed to halt the slide.
Instead China's factories are running at their slowest rate of expansion since May 2009, data on Sunday showed. Industrial output growth in August eased to 8.9 per cent year-on-year, according to data from the National Bureau of Statistics (NBS) on Sunday.
Surveys of purchasing managers in the manufacturing sector earlier this month showed concerns growing about new business, suggesting that factories would run inventories down further before they begin to turn production up again. – Reuters
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