Chinese export slump revives fears about economy

Chinese exports slumped in April after a robust performance in March, sparking fresh anxieties about the health of the world’s second largest economy amid fears about rising debt levels.

After a rebound in March, export growth fell back in April, down 1.8 per cent in dollar terms, which was below market expectations, and comes after positive growth of 11.2 per cent year-on-year in March.

Meanwhile Chinese imports were down 10.9 per cent year-on-year in US dollar terms and 5.7 per cent in renminbi terms.

The data rose 4.1 per cent in yuan terms, and April’s figures were skewed by the fact that Chinese New Year, which affects trade, was in early February this year.

Investors are looking to the data for guidance on what direction the Chinese economy is heading.

There are fears of a commodity bubble and while property prices are rising strongly again in the big cities.

According to data from the General Administration of Customs (GAC), April imports of iron ore, crude oil and copper rose 6.1 per cent, 11.8 per cent and 23.1 per cent respectively, the data showed, while imports of coal, steel and refined oil fell.

Combined with a growing number of debt defaults and bad loans, investors are more bearish than before, and the government has sought to dampen expectations of further stimulus plans.

Concern that China’s economy is losing impetus is reflected in fears about the overall global economy.

The Federal Reserve will be watching how China does before making a decision whether to raise US interest rates in June.

China’s economy grew 6.7 per cent year on year in the first quarter of 2016, its most sluggish in a quarter century.

The data will also prompt debate about whether China will allow the yuan to depreciate more significantly, but that is a tough call for the government as it could trigger competitive devaluations by trade rivals and risk more capital flight, similar to the Asian financial crisis in 1997.

HSBC Greater China economists Jing Li and Julia Wang said that the data showed evidence of stablisation but that the outlook remained uncertain.

“With the latest regional and global PMIs pointing to soft growth momentum, the outlook for exports remains challenging in the coming months,” they wrote in a research note.

“April trade data came in weaker than expected with the downside surprises mostly seen on the import side. Imports of major commodities declined more sharply in volume than in value terms, underscoring the fragile nature of the domestic demand recovery at the current stage.”

Foreign trade edged down 0.3 per cent year on year to 1.95 trillion yuan (€260 billion) last month, while foreign trade for the first four months combined slipped 4.4 per cent to 7.17 trillion yuan (€970 billion).

Exports to the European Union, China's largest trade partner, climbed 1.3 per cent year on year in the first four months, according to the GAC figures.

In the same period, exports to the United States and the Association for Southeast Asian Nations (ASEAN), China’s second- and third-largest trade partners respectively, both declined 3.5 per cent.

There were indications that the data would be underwhelming — China’s purchasing managers’ index came in at 50.1 in April, down slightly from 50.2 in March.