China’s Import Growth Misses Estimates for June

China’s Import Growth Misses Estimates for June as Exports Slow
Containers are stacked at the Dayaowan Bonded Port Area in Dalian, Liaoning Province, China. Photographer: Nelson Ching/Bloomberg

China’s imports rose less than anticipated in June, pushing the trade surplus to a three-year high and adding pressure on the government to support demand as the global economy slows.

Inbound shipments increased 6.3 percent from a year earlier, the customs bureau said in a statement today in Beijing, compared with the 11 percent median estimate in a Bloomberg News survey of 32 economists. Export growth slowed to 11.3 percent and the trade surplus rose to $31.7 billion.

The data add to signs of flagging momentum for global growth as Europe’s debt crisis curbs exports and property controls restrain domestic demand in the world’s second-biggest economy. Rising surpluses may further strain trade relations with the U.S., which surpassed the European Union in the first half as China’s biggest foreign market and is in the midst of a presidential election marked by criticism of the Asian nation.

“There’s something bad for everyone in this,” said Tim Condon, chief Asia economist at ING Financial Markets in Singapore, who previously worked at the World Bank. “On the import side the news is just bad,” with evidence of weak investment spending, which “reinforces hard-landing worries,” he said.

The MSCI Asia Pacific Index of stocks reversed gains after the report, falling 0.3 percent at 2:23 p.m. in Tokyo. An S&P/ASX 200 subindex of Australian materials suppliers dropped 1 percent as companies including BHP Billiton Ltd. and Rio Tinto Ltd. declined, an indicator of their reliance on Chinese demand.

Weaker Currency

China has allowed its currency to weaken this year amid slowing growth and Europe’s turmoil. The yuan fell 0.88 percent from April through June, the biggest quarterly decline since a dollar peg ended in 2005. Today it strengthened 0.1 percent to 6.3678 per dollar at 1:22 p.m. local time, according to the China Foreign Exchange Trading System.

The country’s trade surplus with the U.S. and lack of currency gains have been issues in the U.S. election campaign this year, as American job growth slowed last quarter. Mitt Romney, the Republican presidential candidate, has criticized President Barack Obama as too soft on China. At the same time, Obama has expanded trade complaints against the nation: Last week he accused it of imposing unfair taxes on American vehicles, mostly from General Motors Co. and Chrysler Group LLC.

“This kind of headline is going to be a red flag to U.S. politicians that have to be seen doing something, especially with the jobs picture,” Condon said.

Exceeding Estimates

The increase in exports compared with a 15.3 percent gain in May. The median estimate of analysts in a Bloomberg survey was for a 10.6 percent gain. The trade surplus was wider than the $24 billion median forecast of economists.

A gauge of export orders in China’s official purchasing managers’ index for June showed a contraction for the first time since January, suggesting that overseas shipments may slow in coming months.

The nation cut benchmark interest rates on July 5 for the second time in a month, adding to the first reduction since 2008 and three cuts in banks’ reserve requirements since November.

Economic growth may have slowed to 7.7 percent in the second quarter from a year earlier, according to the median estimate of 36 economists in a Bloomberg News survey. The economy expanded 8.1 percent in the first three months, the fifth quarterly deceleration. Data will be announced July 13.

‘Large’ Pressure

Premier Wen Jiabao said authorities will intensify fine-tuning of policies as downward pressure on the economy remains “relatively large,” according to a July 8 report by the official Xinhua News Agency.

The government will promote steady growth in overseas sales, Wen said. He also urged Chinese exporters to explore markets throughout Asia and diversify trading partners in the face of rising protectionism, according to the Xinhua report.

The latest figures put the government further at risk of missing its goal of 10 percent growth in trade this year. First-half exports rose 9.2 percent from a year earlier, while imports gained 6.7 percent. Sales to the European Union fell 0.8 percent in the first six months, while U.S. exports rose 13.6 percent.

A survey of almost 2,000 exporters by the customs bureau last month indicated that in the near future “China’s foreign trade situation is still not optimistic,” the bureau said in its statement today.

Commerce Minister Chen Deming said on June 18 that meeting the goal is “still possible” if the European debt crisis can be contained in the second half. Vice Premier Wang Qishan said July 5 that fulfilling the target will be an “arduous task,” according to the official Xinhua News Agency.

Equipment Imports

Foreign companies’ imports of equipment and other items for investment fell 22 percent in the first half, the customs bureau said.

The “weak” growth in imports resulted from both China’s domestic demand and “artificially high inventory” levels in the commodities industry, said Joy Yang, chief Greater China economist at Mirae Asset Securities (HK) Ltd. in Hong Kong.

The U.K. may report today that industrial production fell in May from the previous month, according to the median estimate in a Bloomberg News survey of economists. Readings on industrial output are due in France and Italy and the U.K. will also give trade data. A U.S. survey of small businesses may show a decline in confidence for June.

Also in Europe, Luxembourg, the richest country in the 17-nation euro zone, claimed two top economic-policy positions and Germany held on to a third in the climax of months of wrangling over high-level appointments.

Mersch Appointment

Luxembourg’s Yves Mersch, Europe’s longest-serving central banker, was named to the European Central Bank’s Executive Board. Prime Minister Jean-Claude Juncker’s term as chairman of euro finance meetings was extended and Germany’s Klaus Regling, head of the euro-area’s temporary bailout fund, was named to run the permanent one that starts operations soon.

‘‘It is very important now for both the euro zone and the global economy that the shift can be made from tackling the problem of sovereign debt and of bank capitalization, shift from these two problems towards growth-enhancing policies,” Yves Leterme, deputy secretary-general at the Organization for Economic Cooperation and Development, said yesterday in an interview in Seoul.

China’s consumer inflation eased to a 29-month low of 2.2 percent in June, a statistics bureau report showed yesterday. Sun Junwei, a Beijing-based economist at HSBC Holdings Plc, said the development provides “sufficient room for more aggressive easing to support growth.”

The government may cut banks’ reserve requirements again as soon as this month and needs to boost capital spending on infrastructure, though not to the extent it did in 2008 and 2009, said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong.

“They don’t have to be as aggressive as last time around but nonetheless right now, infrastructure investment is the instrument that’s the most effective in the short term,” Zhang said in an interview with Bloomberg Television.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE