Photographer: Brent Lewin/Bloomberg

China’s Export Engine Loses Steam, Adding to Growth Concern

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China’s exports unexpectedly slumped the most in more than a year in March, eroding the outlook for one of the economy’s better performing areas in recent months.

Overseas shipments fell 14.6 percent from a year earlier in yuan value, the customs administration said in Beijing on Monday. That compared with the median estimate for an 8.2 percent rise in a Bloomberg News survey of analysts. Imports slid 12.3 percent, leaving a trade surplus of 18.16 billion yuan ($3 billion).

The export decline raises questions over the durability of global demand and deepens challenges for an economy grappling with overcapacity and a property slump. The country’s central bank has relaxed rules on home purchasing, cut interest rates twice and reduced the amount banks have to set aside in the past six months, with economists forecasting further stimulus.

“Consumption is weak, investment is decelerating, and now exports have come in as weaker-than-expected,” said Liu Xuezhi, an economist with Bank of Communications Co. in Shanghai. “Downward pressure on economic growth is increasing, making it more urgent for the government to start rolling out more pro-growth policies.”

The Australian dollar, seen as a proxy for China’s economy due to Australia’s shipments of raw materials, fell after the release. Chinese stocks rallied on bets for further stimulus.

Slower Growth

Gross domestic product data scheduled for Wednesday will probably show the economy expanded 7 percent in the first quarter from a year earlier, according to the median estimate of 38 economists in a Bloomberg survey as of April 10. That would be the slowest pace since the first quarter of 2009.

Trade growth faces challenges from weak external demand, slower economic growth and lower commodity prices, customs bureau spokesman Huang Songping said at a briefing in Beijing.

In U.S. dollar terms, exports fell 15 percent from a year earlier while imports slipped 12.7 percent, leaving a trade surplus of $3.08 billion in March. Shipments to the U.S. dropped 8 percent, to the European Union fell 19 percent and to Japan tumbled 25 percent.

The “dismal” March export performance comes despite a higher number of working days and a low base and will spur fears that foreign demand is being undermined by a stronger yuan, Dariusz Kowalczyk, senior economist at Credit Agricole SA in Hong Kong, wrote in note.

The yuan may weaken and onshore rates will be lowered, he wrote. “Odds are also rising for more government stimulus.”

Developing East Asian economies will grow at a slightly slower rate this year, the World Bank said in a report, citing China’s moderating expansion.

Domestic Demand

On the import side, the momentum of processing trade -- goods used in manufacturing or assembly of products for export - - remained weak in March, while imports of goods consumed in China improved, said Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong.

“It suggests domestic demand momentum may be improving, on the back of tentative signs recent policy easing is having an impact on the economy,” Kuijs wrote.

China’s trade data need to be handled with care, Bloomberg economists Tom Orlik and Fielding Chen wrote, noting the surprisingly high February export performance.

“Seeing past the ups and downs, year to date growth is in the mid single digits,” they wrote in a note. “That’s not stellar, but it’s in line with growth in global imports and we believe it’s sustainable.”

— With assistance by Xiaoqing Pi, and Xin Zhou

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