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China Import Growth Slide Deepens Global Growth Risk: Economy

China’s slowing export growth may lead to smaller yuan gains this year. Photographer: Nelson Ching/Bloomberg
China’s slowing export growth may lead to smaller yuan gains this year. Photographer: Nelson Ching/Bloomberg

Jan. 10 (Bloomberg) -- China’s import growth fell to a two-year low in December, underscoring a slowdown in the fastest-growing major economy that deepens risks for the global outlook.

Imports rose 11.8 percent from a year before, less than all 21 estimates in a Bloomberg News survey of economists, a government report showed today in Beijing. The moderation caused the trade surplus to increase to $16.5 billion in the month, as exports advanced 13.4 percent in December.

Signs of domestic demand moderation bolstered forecasts for monetary easing -- spurring a gain in local stocks -- as Europe veers toward a recession and the International Monetary Fund prepares a “substantial” cut to its global growth forecast. The widening surplus may give U.S. Treasury Secretary Timothy F. Geithner ammunition to renew pressure for a stronger yuan on a visit to Beijing today.

“China will be asked to step up and shoulder more responsibility, together with the U.S., to ensure the world does not fall into a recession again,” said Liu Li-Gang, an economist in Hong Kong at Australia & New Zealand Banking Group Ltd. who previously worked at the World Bank. “If the yuan were to depreciate this year, China’s exchange-rate policy will be accused of a ‘beggar thy neighbor policy.’”

The Shanghai Composite Index of stocks climbed 2.2 percent as of 1:44 p.m. local time, rising on speculation the central bank may add to last month’s cut in banks’ reserve requirement ratio. Qu Hongbin, HSBC Holdings Plc’s chief China economist, today predicted three reductions in the next six months.

Yuan Policy

The yuan was little changed at 6.3127 per dollar today. It has appreciated about 8 percent since Premier Wen Jiabao allowed greater fluctuation in June 2010 as the global recovery strengthened. The U.S. Treasury Department said last month the yuan is substantially undervalued and the U.S. will “press for policy changes that yield greater exchange-rate flexibility.” Geithner starts a two-day visit to Beijing today.

Slower import growth in China is bad news for Australia, which counts on the nation as its biggest export destination and last week reported that its trade surplus unexpectedly narrowed as shipments of resources slowed. The Philippines today said its exports slid 19.4 percent in November from a year earlier.

The euro region’s danger of a recession may be reinforced by a report today showing industrial production in France fell 0.2 percent in November from a month earlier, according to the median estimate of 14 economists surveyed by Bloomberg News.

U.S. Improvement

By contrast, U.S. data have signaled improvement. Job growth picked up in December and consumer credit jumped by $20.4 billion in November, reports in recent days showed. A release today may indicate a monthly gain in wholesale inventories in November, with restocking forecast to add to gross domestic product.

The IMF is scheduled to release revised global projections Jan. 24 or Jan. 25. Olivier Blanchard, the Washington-based fund’s chief economist, said in a Bloomberg Television interview last week that with European growth “very close to zero at this point,” there would be a “substantial” cut to the most recent 2012 global expansion estimate of 4 percent.

Weakening import growth may undermine China’s ability to lead the recovery as it did after the 2008 crisis. The nation’s expansion may slide to 7.7 percent this quarter, the slowest pace in three years, according to a UBS AG forecast.

“There will be a ripple effect on the rest of the world, particularly those who rely on China’s imports, such as commodity exporters,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong. “This reinforces our view that China’s GDP growth will be below 8 percent in the first quarter.”

Fourth Quarter

The government may say on Jan. 17 that fourth-quarter Chinese growth slowed to 8.7 percent, according to the median estimate of 23 economists surveyed by Bloomberg.

China’s trade surplus compared with $14.5 billion the previous month and the median estimate of $8.8 billion in a Bloomberg survey.

Imports rose the least since gains resumed in November 2009. The slowdown may have been driven by lower prices, said Chang Jian, a Hong Kong-based economist with Barclays Capital. “Chinese demand is moderating but at a rather steady pace and has remained robust by international standards,” she said.

China’s Vice Commerce Minister Zhong Shan warned yesterday the country’s external trade environment may be “grimmer” this year as demand weakens and global competition intensifies, the official Xinhua news agency reported. Exports of labor-intensive goods are slowing “relatively quickly” and China is losing market share in Japan, the European Union and the U.S., he said.

Adidas Shift

Sportswear producers including Adidas AG are moving some production to Central America to be closer to the U.S. market and as labor costs in China rise. Adidas, the world’s second-biggest sporting goods maker, plans to increase its production in the region fivefold by 2015, the company said last month.

The government’s fine-tuning policies may intensify in response to the data, said Tim Condon, chief Asia economist at ING Financial Markets in Singapore.

“The slowdown in export growth is compounding the impact of tight financial policies, especially housing policies, to dampen domestic spending,” Condon said. “Another reserve-ratio cut appears imminent and the slower pace of yuan appreciation looks set to persist.”

China’s central bank lowered the required reserve ratio for banks for the first time in almost three years in December to encourage lending, shifting its stance from fighting inflation as price pressures eased.

Meantime, policy makers may also curb gains in the yuan even with pressure from abroad for it to strengthen.

The currency may see at best “minimal appreciation” against the dollar in the first quarter and at most a 2 percent advance for the full year, Dariusz Kowalczyk, a Hong Kong-based strategist with Credit Agricole CIB, said in a Jan. 4 report.

For 2011, China’s trade surplus narrowed 14.5 percent to $155 billion, the customs bureau said today. That’s the third straight annual decline since a record $298 billion in 2008. Full-year exports rose 20.3 percent to $1.9 trillion and imports climbed 24.9 percent to $1.7 trillion.

To contact the reporter on this story: Victoria Ruan in Beijing at

To contact the editor responsible for this story: Chris Anstey at

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