China’s exports unexpectedly declined in April and imports slumped, adding downward pressure on an economy grappling with overcapacity and waning competitiveness.
Overseas shipments fell 6.2 percent from a year earlier in yuan value, the customs administration said in Beijing on Friday. That compared with the median estimate for a 0.9 percent rise in a Bloomberg survey of analysts. Imports slid 16.1 percent -- the fourth straight double-digit decline -- leaving a trade surplus of 210.21 billion yuan ($33.9 billion).
Stronger demand from a recovering U.S. economy is being offset by sluggishness in Europe and a slide in shipments to Japan, compounding challenges for a nation facing rising labor costs and a strong currency. The central bank has cut benchmark interest rates and banks’ reserve ratios twice in the last six months to cushion an economic slowdown.
“Exports, once regarded as a stabilizer for growth this year, are now becoming a downside risk,” said Li Wei, the China and Asia economist for Commonwealth Bank of Australia in Sydney. “The government has to do more to help growth.”
Chinese shares advanced on speculation the weaker-than-expected trade performance will prompt additional stimulus. The Australian dollar, seen as a proxy for China’s economy due to its shipments of raw materials, weakened.
While Chinese exports to the U.S. rose 9.2 percent in the January to April period in yuan terms, exports to the EU dropped 0.7 percent and shipments to Japan tumbled 12 percent, according to China’s customs administration.
“The weakness globally in the first quarter wasn’t transitory and it’s going to persist,” said Tim Condon, head of Asia research in Singapore at ING Groep NV. “It’s time for another rate cut. We could see something almost immediately based on these numbers.”
Exporters in the Pearl River Delta manufacturing hub are facing persistent labor shortages and rising wages, according to a survey of manufacturing clients by Standard Chartered Plc. The nation’s 274 million migrant workers, the backbone of China’s labor-intensive manufacturing industry, are getting older and more expensive, with their average age increasing to 38.3 years in 2014 from 35.5 five years earlier, according to a quarterly survey from the National Bureau of Statistics.
China’s currency has climbed more than 10 percent in the past year in trade-weighted terms, eroding competitiveness.
“With China’s peacekeeper role in the currency wars hurting exports, the obvious solution is yuan depreciation,” Bloomberg economists Tom Orlik and Fielding Chen wrote in a note. “The trouble for China’s leaders is that support for exporters in the form of a weaker currency could come at the risk of capital flight. As recent comments from Premier Li Keqiang suggest, China’s leaders are likely to hold the line with a stable currency.”
China’s economy expanded at the weakest pace since 2009 last quarter, with industrial output, fixed-asset investment and retail data pointing to a deepening slowdown.
In U.S. dollar terms, exports fell 6.4 percent from a year earlier while imports slipped 16.2 percent, leaving a trade surplus of $34.1 billion in April.
Exports in previous months were volatile due to distortions from the Lunar New Year holidays, which falls in different weeks early in the year and leads to widespread factory shutdowns. That may still be playing a role, according to Julian Evans-Pritchard, Singapore-based China economist with Capital Economics Ltd.
“Looking ahead, we are still relatively sanguine over the outlook for Chinese trade despite today’s disappointing data,” he wrote in a note. “We expect negative export growth to prove short lived.”
— With assistance by Xin Zhou, and Kevin Hamlin