Business - China 2011 trade surplus shrinks as demand weakens

Jan 10, 2012

China's trade surplus shrank in 2011 as import and export growth slowed sharply, official data showed Tuesday, after domestic tightening measures and global economic turmoil hit consumption.

 

The figures add to mounting evidence the economy is slowing and will ratchet up pressure on Beijing to further loosen policies to prevent the world's second-largest economy from suffering a painful hard landing.

 

The 2011 trade surplus -- flagged by Commerce Minister Chen Deming last week -- narrowed to $155.14 billion from $181.51 billion in 2010, the customs agency said in a statement, reflecting the turmoil in Europe and the United States.

 

Exports rose 20.3 percent to $1.899 trillion in 2011, compared with an increase of 31.3 percent in the previous year, while imports rose 24.9 percent to $1.743 trillion, much slower than the 38.8 percent growth in 2010.

 

Analysts expected export growth to halve this year from 2011 as European woes and a sluggish US economy drag Chinese economic expansion below nine percent for the first time in more than a decade.

 

Weakening demand for exports will "provide further drag on the Chinese economy at least through the first half of the year," said IHS Global Insight analysts Alistair Thornton and Ren Xianfang.

 

Moody's economist Alaistair Chan said the slowdown in imports would push policymakers to cut the reserve requirement ratio -- the portion of deposits banks must set aside -- several times in the first half to spur lending.

 

Gross domestic product growth could ease to 8.5 percent in 2012, a senior government researcher said last month, which would be the slowest pace since 2001 when the economy expanded 8.3 percent.

 

But it would still be within the official annual target of 7-8 percent, a level seen as necessary to create enough jobs to keep a lid on social unrest in the country of more than 1.3 billion people.

 

Chinese shares were up 1.64 percent, or 36.48 points, at 2,262.37 in early afternoon trade as reports that the country's top market regulator had pledged reforms overshadowed the figures.

 

Despite the grim outlook, Beijing is likely to remain under pressure for a stronger currency -- a constant bugbear for China's trade partners who argue the yuan is too cheap and gives domestic exporters an unfair trade advantage.

 

The US Treasury said last month that the yuan is still significantly undervalued, although it refrained from saying Beijing manipulates the currency, which could lead to retaliatory action by Congress.

 

Other data released by customs on Tuesday showed December's trade surplus widened to $16.52 billion from $14.5 billion in November, while year-on-year growth in exports and imports slowed.

 

Exports rose 13.4 percent to $174.72 billion, compared with a rise of 13.8 percent in November.

 

The figure suggested overseas demand was softening but "has not collapsed", said IHS Global Insight.

 

Imports increased 11.8 percent to $158.2 billion compared with a 22.1 percent rise in the previous month, signalling that tight restrictions on bank lending and the property market had hurt domestic consumption.

 

In November, China cut the amount of money banks must hold in reserve for the first time in three years to spur lending and counter the turmoil overseas, but policymakers appear to have ruled out any major stimulus packages.

 

Senior Chinese leaders have repeatedly vowed to maintain a "prudent monetary policy and proactive fiscal policy" in 2012, suggesting they will move cautiously to open credit valves to avoid reigniting inflation.

 

- AFP/al/cc

Related News

• Gold prices close to VND41 million/tael
• Giant business group develop Phu Quoc
• Eurocham not happy with new regulations on liquor import
• Tax reductions proposed to ease burden on production sector
• Smoke and mirrors

More Categories

• Business
• Entertainment
• Popular

Comments

Powered by Disqus