China’s exports and imports fell for the first time in two years in January and lending grew less than estimated, adding to signs growth is weakening in the world’s second-largest economy.
Overseas shipments decreased 0.5 percent and imports declined a more-than-forecast 15.3 percent from a year earlier in a month that had four fewer working days than January 2011 because of the Chinese New Year holiday, the customs bureau said today.
The lowest January new lending in five years and the smallest money-supply growth in more than a decade underscore the case for more easing even as seasonal distortions make the numbers harder to gauge. Commerce Minister Chen Deming said yesterday January exports “cannot make us optimistic” and the International Monetary Fund warned this week a deterioration in Europe could cut China’s expansion rate almost in half this year.
“The weakness in trade and lending is more than can be explained by holiday effects, pointing to growing downside risks in the domestic economy due to cooling in the property market and investment,” said Joy Yang, chief economist for Greater China at Mirae Asset Securities (HK) Ltd. in Hong Kong.
Still, policy makers may wait to move more aggressively with policy easing until next quarter when inflation drops to more of a “comfort zone” and weaker economic data justify the actions, Yang said.
The Shanghai Composite Index gained 0.1 percent today, while the MSCI Asia Pacific Index was down 1.4 percent at 8:21 p.m. in Tokyo.
The trade surplus widened to a six-month high of $27.3 billion, customs bureau data showed. M2, the broadest measure of money supply, rose 12.4 percent, less than all 29 estimates in a Bloomberg News survey, People’s Bank of China data released today showed.
Banks extended 738.1 billion yuan ($117 billion) of new yuan-denominated loans last month, compared with the 1 trillion yuan median estimate in a Bloomberg News survey. New lending totaled 640.5 billion yuan in December, and last month’s figure was lower than 25 of 26 analyst estimates.
The trade surplus may increase pressure on China to quicken the pace of yuan appreciation and will also delay a projected reduction in required reserves for banks, said Liu Li-Gang, an economist in Hong Kong at Australia & New Zealand Banking Group Ltd. The currency rose to an 18-year high against the dollar today ahead of Chinese Vice President Xi Jinping’s visit to the U.S. next week. China lowered the bank-reserve ratio in December for the first time since 2008.
January’s data gave “mixed signals” on prospects for the next reserve-ratio reduction as inflation and the trade balance may lower chances of an immediate cut whereas weaker-than- forecast loan data boosts the case for a move, Mirae’s Yang said.
The median estimate of 30 economists was for a 3.6 percent drop in imports for the month. Trade data in the first two months of the year are distorted by the timing of the Chinese New Year festival which fell in January this year. Adjusted for the holiday, exports rose 10.3 percent from a year earlier while imports were up 1.5 percent, the customs bureau said.
The decline in exports compared with the median estimate for a 1.4 percent drop in a Bloomberg News survey. The median analyst estimate was for a $10.4 billion trade surplus last month after a $16.5 billion excess in December and $6.46 billion a year ago.
Imports fell for the first time since October 2009. Last year, purchases from overseas rose 51 percent in January from a year earlier.
Demand ‘Picking Up’
In China factories had less need to build up inventories ahead of the holiday, ANZ’s Liu said. “We do not believe this is a sign of a demand slowdown,” said Liu, who previously worked at the World Bank. “On the contrary, demand has been steadily picking up.”
Tom Albanese, chief executive officer of Rio Tinto Group, said yesterday he remains confident of a so-called soft landing in China. The nation provided 28 percent of Rio Tinto’s revenue in its most recent financial year, according to data compiled by Bloomberg.
Yuan-denominated deposits dropped 800 billion yuan in January, the central bank said today. That would be the largest monthly decline in at least 12 years, according to data compiled by Bloomberg that go back to 2000.
“The weak pace of deposit growth has been a constraint to bank lending,” Jing Ulrich, chairman of global markets for China at JPMorgan Chase & Co., said in a note after the data. “With the stringent loan-to-deposit ratio requirement of 75 percent still in place, individual banks’ loan growth may remain constrained.”
Elsewhere in the Asia-Pacific region, the Australian central bank lowered its forecasts for growth and inflation this year. The outlook for consumer prices provides “scope for easier monetary policy should demand conditions weaken materially,” the Reserve Bank of Australia said.
In Europe, U.K. factory output prices rose at the fastest pace in nine months as manufacturers increased the price of alcohol, petroleum products and clothing, according to report from the Office for National Statistics in London.
The trade deficit in the U.S. probably widened to $48.5 billion from the $47.8 billion shortfall in November, according to a Bloomberg News survey ahead of Commerce Department data today.
‘Significant’ Fiscal Stimulus
China’s inflation accelerated last month for the first time since July as food prices climbed before the holiday that started Jan. 22, a statistics bureau report showed yesterday. An index of export orders in the agency’s survey of manufacturing purchasing managers released last week showed a contraction for the fourth straight month.
The IMF said in a Feb. 6 report that China’s economic expansion may be cut almost in half from its 8.2 percent estimate this year if Europe’s debt crisis worsens, a scenario that would warrant “significant” fiscal stimulus from the government.
--Zheng Lifei, Li Yanping. With assistance from Ailing Tan in Singapore, Penny Peng and Regina Tan in Beijing. Editors: Scott Lanman, Nerys Avery
To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at email@example.com
To contact the editor responsible for this story: Paul Panckhurst at firstname.lastname@example.org