world growth

world growth

Wednesday, December 10, 2008

China's exports fall for first time in 7 years

Things are looking dire. China really needs to get its domestic consumption up to replace the loss in exports.

China's exports fall for first time in 7 years


BEIJING (AP) — China's trade growth collapsed in November as global consumer demand plunged, adding to pressure on Beijing to reverse a worsening economic slump and avert heavy job losses, data showed Wednesday.

November's exports fell 2.2 percent from the year-earlier period, the first decline in seven years, the government reported. That was down sharply from October's export growth of 19.1 percent and well below analysts' forecasts of a 13 to 15 percent rise. Imports fell by 17.9 percent, pushing China's trade surplus to a new high of $40.1 billion.

The decline adds to mounting signs that China's downturn is worsening in areas from manufacturing to real estate to auto sales. Beijing has launched a massive stimulus package to boost growth, but it could be months before the effects are felt and its impact is unclear.

"The economy has almost ground to a halt. Job losses will be very significant, and the risk of social unrest is rising," said JP Morgan economist Frank F.X. Gong. "They urgently need to stimulate growth to generate jobs and keep society stable."

Moody's Investors Service warned that the 4 trillion yuan ($586 billion) stimulus, with a focus on higher spending on highways and other construction projects, will not be enough to make up for the loss in trade.

"China is facing its most serious economic downturn in two decades," the rating agency said in a report. The stimulus package, while large, "will not be able to offset fully the negative effects from the contraction in global trade."

Chinese exporters have been hammered by a drop in foreign demand, leading to factory closures and layoffs. Communist leaders have warned that more job losses might fuel unrest and are pressing employers to minimize cutbacks. Export industries employ millions of migrant workers, and the government says they have begun streaming back to their hometowns, where large groups of jobless workers could fuel political tensions.

There have been scattered labor protests in recent months in Guangdong province in the southeast, the heart of China's export-driven manufacturing industry.

President Hu Jintao and other Chinese leaders ended a three-day economic planning meeting Wednesday with a pledge to make supporting exports a priority. But the government did not immediately release details of possible new initiatives.

"The difficulties for our nation's economy are increasing, and downward pressure on the economy is growing," said a statement issued after the meeting.

China's economy is expected to grow by about 9 percent this year but forecasters expect that to weaken in 2009. The World Bank has cut its 2009 growth forecast from 9.2 percent to 7.5 percent, its lowest since 1990.

JP Morgan's Gong said the economy might not grow at all from the final quarter of this year to the first quarter of 2009.

"China's exports might not show any growth, and might continue to decline into early 2009," he said.

Outside economists say the stimulus could add at most 2 percentage points to China's growth rate. The chief of the country's planning agency has issued a lower forecast, putting the increase in growth at 1 percentage point.

Beijing usually issues monthly customs data in the morning, but took the unusual step of delaying Wednesday's announcement until late afternoon, possibly waiting for financial markets to close to avoid dragging down Chinese stock prices.

China's trade slowdown is a setback for foreign exporters that hoped it might help to support global growth as the United States weakened.

On Wednesday, Beijing told China's airlines to cancel or postpone aircraft purchases due to weak travel demand, a move that could hurt Chicago-based Boeing Co. and Toulouse, France-based Airbus Industrie. The aviation regulator told carriers it will not approve any new aircraft for operation until at least 2010.

November's exports fell to $114.9 billion, while imports dropped to $91.3 billion, the customs agency reported.

It was the first fall in exports since June 2001, according to the official Xinhua News Agency.

In a more encouraging sign, the government also reported Wednesday that wholesale inflation fell to 2 percent in November, a decline from October's 6.6 percent rate as prices of oil and raw materials eased.

That should give Beijing more room to spend heavily to boost growth without the danger that injecting more money into the economy will fuel inflation.

Beijing declared inflation its top priority earlier this year but its focus has shifted quickly in recent months to reviving slowing economic growth.

The decline in producer price inflation suggests consumer inflation, due to be reported Thursday, also fell in November following a yearlong government effort to contain a surge in politically volatile food costs. The government ended its anti-inflation effort Dec. 1 by lifting food price controls imposed earlier in the year.

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