Published February 12, 2009

China exports, imports in shock plunge

January falls are steepest since records started, boding ill for 2009 growth

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(BEIJING) Chinese exports and imports fell unexpectedly sharply in January, underlining how badly the world's third-largest economy has been hit by the global financial crisis and the impact that is having on its neighbours.

Exports fell 17.5 per cent from a year earlier, after a 2.8 per cent decline in December, while imports plunged 43.1 per cent, twice as much as December's 21.3 per cent year-on-year drop, the General Administration of Customs said yesterday.

Both falls were the steepest since economists' records began in 1993. Imports and exports have now fallen for three months in a row from their year-earlier levels.

The declines mirrored big falls elsewhere in Asia and suggested to several analysts that the economy has yet to bottom out - despite green shoots of recovery seen in rising metals prices.

'The economy is still weakening and fundamentals are still weakening, mostly due to the external shock,' said Qing Wang, chief China economist with Morgan Stanley in Hong Kong. 'At least in the next quarter or two, the headwinds from weak external demand will be extremely strong, which is why we expect overall economic growth will be worse before getting better.

As a result of the weakness in imports, China notched up its second-biggest monthly trade surplus. January's total of US$39.1 billion was just shy of last November's record of US$40.1 billion and served as a reminder, ahead of this week's Group of Seven (G-7) finance ministers' meeting in Rome, of the economic imbalances at the root of the global financial crisis.

Economists had expected a US$28.7 billion surplus based on a 10.8 per cent fall in exports and a 28.5 per cent drop in imports from year-earlier levels.

Exports to the US and EU fell 9.8 and 17.4 per cent, respectively. Shipments from Japan fell 43.5 per cent from a year earlier; those from South Korea were down 46.4 per cent and from Taiwan, 58 per cent.

In part, the sharp falls in both imports and exports were exacerbated by the timing of Chinese New Year, which resulted in 17 working days this January compared with 22 last year.

But the drops surpassed most economists' already bleak projections, and with no sign of a pick-up in demand overseas, the export picture is likely to worsen before it improves.

However, analysts broadly agree that the Chinese economy remains more resilient than many in the region, and that the authorities have plenty of room to beef up the already considerable stimulus measures they have announced in recent months.

And 'while the recent export slowdown has been alarming, China's export slump has not been as severe as in some neighbouring countries with a greater reliance on high-tech exports', said Jing Ulrich, chairman of China equities at JPMorgan in Hong Kong. -- Reuters, IHT