CHINA’S TRADE surplus, so long a stumbling block in relations with Europe and the US, plunged in February as exports fell by a record amount, putting Beijing under pressure to boost domestic consumption to prop up the world’s third-largest economy.
At the same time, capital spending accelerated sharply with the help of some good old-fashioned pump-priming in the shape of the government’s massive stimulus package. The trade gap narrowed to $4.8 billion (€3.75 billion), about an eighth of the amount in the previous month, the customs bureau said.
Exports tumbled nearly 26 per cent from a year earlier, while imports were down 24 per cent. The drop in exports is the steepest since records began in 1993.
Premier Wen Jiabao this month set an optimistic 8 per cent growth target and has introduced a €460 billion package of tax cuts and infrastructure spending, which may offset some of the downside from falling global trade.
Exports, so long the engine of Chinese growth, are unlikely to improve any time soon and the Chinese government is hoping a combination of the stimulus plan and efforts to boost domestic spending can offset some of the pain.
The fiscal stimulus is translating into an expansion in fixed-asset investment, which surged by nearly 27 per cent in the first months of the year.
Fixed-asset investment in infrastructure such as roads, railways and power grids is the most important driver of China’s economic growth and accounts for 42 per cent of GDP.
Tens of thousands of companies have shut across China as the slowdown continues, including 20,000 small and medium-sized companies in the one-time booming province of Guangdong.
At the same time, there are some early signs of recovery – lending is on the rise, as is power consumption, while the main stock exchange, the Shanghai Composite Index, has registered gains of 20 per cent this year. Cement and steel output rose 17 per cent and 2.4 per cent, respectively, in the first two months, and car sales topped 800,000 in February for the first time in eight months.
However, the senior leadership has said the economy remains in its worst crisis in many years. The economy grew 6.8 per cent in the fourth quarter.
