- Chinese imports fell sharply in January, a sign of sluggish domestic demand
- Exports also dipped as companies felt a chill wind from Europe's debt troubles
Chinese imports fell sharply in January, a sign of sluggish domestic demand that will fuel concerns about whether the fragile global economy can count on China as a bastion of growth.
Adding to the grim picture, China's exports also dipped last month as its companies felt a chill wind from Europe's debt troubles. Exports fell 0.5 per cent year on year, the first decline since late 2009.
Imports plunged 15.3 per cent, leaving China with a trade surplus of $27.3bn on the month.
However, the numbers were significantly distorted by China's New Year holiday last month, which brought the country's businesses to a standstill for a full week.
Economists had expected an import slowdown because of the calendar effect, but Alistair Thornton with IHS Global Insight in Beijing said that was not a sufficient explanation.
"Such a dramatically low import number reflects extremely weak domestic demand as investment slumps and drags on economic activity," he said.
The focus in China has already begun to shift to how the government can prop up growth. Beijing has been cautious so far to launch any aggressive stimulus measures, for fear of fanning a rebound in inflation and public debt.
It has instead taken a more low-key approach: instructing the country's state-owned banks to lend more, experimenting with a relaxation of property market restrictions in smaller cities and planning subsidy programmes to encourage consumption.
Stephen Green, an economist with Standard Chartered in Hong Kong, cautioned against overreacting to the weak data. "Given the factories were closed, it's silly season for the numbers," he said. "In the next three months, the slowdown will probably be exacerbated, but then China should climb back."
Soft exports are likely to make the Chinese government's task more difficult. Economists and officials say that the country's overall trade surplus is likely to be considerably smaller than in recent years -- a reflection of just how weak the global economy remains.
"The exports this January cannot make us optimistic," Chen Deming, commerce minister, said this week.
The International Monetary Fund has warned that economic growth in China could drop by half this year if there is a deep recession in Europe because the country would be "highly exposed" through trade ties.
Aware of the bleak outlook, Beijing has taken a variety of measures to support its export sector. It has promised to expand tax rebates for companies selling goods abroad and, more controversially, also slowed the pace of renminbi appreciation.
Another move that could help exporters would be financial aid for Europe, which is China's largest single export market. Last week in a visit to China's manufacturing heartland in Guangdong province, Premier Wen Jiabao said that "helping to stabilise the European market is actually also helping ourselves".
China's trade surplus peaked at nearly $300bn in 2008 and has been narrowing since then. It fell to $155bn last year. Lu Ting, an economist with Bank of America Merrill Lynch, forecasts that the surplus will plunge to $41bn this year, which would be the smallest in nearly a decade.