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UPDATE 4-China trade data underscores growth worries
June 8, 2013 / 6:26 AM / 4 years ago

UPDATE 4-China trade data underscores growth worries

* Export growth well below forecasts, imports fall
    * Figures shorn of speculative elements after crackdown
    * Retail, industrial data on Sunday may add to concerns
    * Official says economy facing great downward pressure


    By Xiaoyi Shao and Jonathan Standing
    BEIJING, June 8 (Reuters) - China's exports posted their
lowest growth rate in almost a year in May while imports
unexpectedly fell, government data showed on Saturday,
underlining concerns that growth in the world's second-largest
economy could slow anew in the second quarter.
    Evidence has mounted in recent weeks that the economy is
fast losing growth momentum as sluggish domestic demand fails to
make up for lethargic export sales. 
    The latest figures, shorn of the hot money speculation and
exports to warehouses but booked as sales that had inflated
previous months' data, more accurately reflect the grim reality
facing China's exporters.
    "The trade data reflects the sluggish domestic and overseas
demand, signalling a slower-than-expected recovery in the second
quarter," said Shen Lan, an economist at Standard Chartered in
Shanghai.
    Data for May retail sales and industrial output, as well as
investment and inflation, are due on Sunday and could provide
more evidence of the slowdown. 
    Exports edged up 1 percent in May from a year earlier, the
lowest growth since last July and against a median forecast in a
Reuters poll of a rise of 7.3 percent. Data was even worse for
imports - they fell 0.3 percent against expectations of a 6
percent rise.
    The trade surplus was $20.4 billion for the month, compared
with market expectations of $19.3 billion. 
    Exports to the United States, China's top export
destination, fell 1.6 percent in May, the third straight month
of declines, while those to the European Union, the second most
important market, fell 9.7 percent, also the third straight
month of declines.
    However, in one bright sign, separate customs data showed
that China's imports of major commodities rose in May compared
with the previous month, helped by lower prices on world markets
and pointing to resilient demand. 

    TESTING TIMES
    It has been an uncomfortable few months for China's leaders
as a raft of data has pointed to a lack of traction for growth.
    "The domestic economy is facing great downward pressure and
the stable development of foreign trade still faces great
challenges," Vice-Minister of Commerce Zhong Shan said in a
statement on the ministry's website (www.mofcom.gov.cn).
    China's overseas demand had not recovered obviously while
exporters faced more fierce competition in the global market,
Zhong said.
    However, Premier Li Keqiang struck a more upbeat note, being
quoted by state television as saying that China's economy was
generally stable, growth was within a "relatively high and
reasonable range" and the employment situation was stable.
    "There are increasingly intricate and complicated factors in
the economy and we should strictly monitor the changes in the
economic situation," said Li.  
    China needs to make use of liquidity already in the economy
to support real economic development and curb over-capacity in
certain industries, he added.
    Surveys this month showed that China's factory activity
shrank for the first time in seven months in May, with export
orders falling, while growth in the services sector cooled.
. 
    A Reuters poll taken before Sunday's retail and industrial
data shows industrial output is seen up 9.3 percent, unchanged
from April, while growth in fixed-asset investment, one of the
two main drivers of China's economy in 2012, likely rose 20.5
percent in the first five months of this year.
    That would be equivalent to investment rising 20.2 percent
in May from a year ago, Reuters' calculations showed, the
slackest pace in at least three months. 
    Growth in retail sales is forecast at 12.9 percent in May,
little changed from April's 12.8 percent and below last year's
monthly average expansion of 14.2 percent.
    The IMF and OECD last month cut their forecasts for China's
2013 economic growth to 7.75 percent and 7.8 percent,
respectively.
    China's annual economic growth had slowed to 7.7 percent in
the first quarter from 7.9 percent in the previous quarter. The
full-year annual growth of 7.8 percent in 2012 was the weakest
since 1999.
    However, China's leaders have adopted a greater tolerance
for a slowdown and are likely to allow quarterly growth to slip
as far as 7 percent before triggering fresh stimulus to lift
activity, sources told Reuters this week. 
        
    NO SMOKE AND MIRRORS 
    One of the reasons the May export data was so grim is that
the government had cracked down on the speculative activities
that had created double digit rises in export growth every month
this year, even as China's main markets slowed.
    "The dramatic slowdown in yoy (year-on-year) export growth
in May in part reflects the impact of a clamp down by the
government on firms dressing up financial inflows as exports,"
Louis Kuijs, an economist at RBS, said in an emailed note.  
    China's customs also acknowledged the lack of extraneous
factors, reflected in the fact that exports to Hong Kong, the
main centre for currency arbitrage and warehouse storage, grew
only 7.7 percent in May, down from a 57 percent surge in April. 
    "The arbitrage trade to Hong Kong has basically been curbed
and the trade between mainland and Hong Kong dropped sharply,"
it said on its website, www.customs.gov.cn.

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