China’s exports and imports fell more than expected last month, with weak domestic and global demand adding to doubts that a pickup in economic activity in the world’s largest trading nation can be sustained.
Exports last month fell 7.3 percent from the same period last year, while imports shrank 1.4 percent, official data showed yesterday, raising fears that a broader recovery seen in recent months could falter.
While recent data had suggested the world’s second-largest economy was steadying, analysts have warned that a property boom, which has generated a significant share of the growth, might be peaking, dampening demand for building materials from cement to steel.
Indeed, China’s imports of iron ore, crude oil, coal and copper all fell last month, after its robust demand drove global prices of many major commodities higher this year.
Although some analysts argued the decline might be seasonal, data from industry consultancy Custeel.com suggested steel mills have been cutting output and even starting maintenance work earlier than usual as soaring costs for raw materials, such as iron ore and coal, squeeze profits.
Analysts polled by Reuters had expected exports last month to have fallen 6 percent year-on-year, compared with a 10 percent annual contraction in September. Imports had been expected to drop 1 percent, after falling 1.9 percent in September.
“Our conclusion is that external demand remains sluggish, but it has not worsened significantly. Although both exports and imports have fallen short of expectations, they have improved on a year-on-year basis,” ANZ economists said in a note, adding that the rate of decline last month had moderated from September.
Still, China’s exports in the first 10 months of the year fell 7.7 percent from the same period a year earlier, while imports dropped 7.5 percent.
Exports have dragged on economic growth this year as global demand remains stubbornly sluggish, forcing policymakers to rely on higher government spending and record bank lending to boost activity. Weak exports knocked 7.8 percent off the nation’s GDP growth in the first three quarters of this year.
Imports fell for the second month in a row last month after rising for the first time in nearly two years in August.
That left the country with a trade surplus of US$49.06 billion last month, versus forecasts of US$51.7 billion, and September’s US$41.99 billion.
In yuan-denominated terms, the trade numbers were not as bad, indicating that the currency’s slide to six-year lows has provided some support for exporters. Yuan-denominated shipments have only fallen 2 percent this year, with imports down 1.8 percent.
“Yuan depreciation should be positive for exports, but it only provides some support for exporters when they convert [US] dollar income into yuan, but cannot reverse the trend,” Merchants Securities Shenzhen-based economist Liu Yaxin (劉亞欣) said.
China’s iron ore imports last month were the lowest since February, while imports of copper, a key material used in building construction, fell to a 21-month low.
Coal imports fell nearly 12 percent from September despite worries that power companies have low inventories heading into winter.
“The ongoing cyclical rebound in China’s economy should support imports for another quarter or two, but is unlikely to last much longer given that the boost to growth from earlier policy easing is set to fade before long,” Capital Economics’ China economist Julian Evans-Pritchard said in a note.