June 8, 2013 / 4:42 AM / 6 years ago

China trade data underscores growth worries

BEIJING (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 about slowing growth in the world’s second largest economy.

An employee walks in a shipping container area at a port near Yangtze River in Wuhan, Hubei province July 10, 2012. REUTERS/Stringer/Files

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.

Export data had shown double digit rises every month this year, but many economists said those figures had included speculative bets on the yuan currency disguised as trade payments as well as exports sent to bonded warehouses in Hong Kong.

The latest figures more accurately reflect the grim reality facing China’s exporters after the government moved to crack down on such activities.

“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. Changing exchange rate expectations are reducing the incentives for such flows at any rate,” Louis Kuijs, an economist at RBS, said in an emailed note.

“Actual yoy export growth is very weak, reflecting a strong base in May last year as well as sluggish global demand and the impact of sizeable exchange rate appreciation.”

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, while imports fell 0.3 percent against expectations of a 6 percent rise.

The latest figures left a trade surplus of $20.4 billion for the month, compared with market expectations of $19.3 billion.

Data earlier 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.

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.

WEAK Q2

The raft of weak figures has raised worries that China could be facing a weak second quarter. Data for may retail sales and industrial output, as well as inflation, are due on Sunday and could provide more evidence of a slowdown.

“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 Charted in Shanghai.

Exports to the U.S., China’s top export destination, fell 1.6 percent in May, the third straight month of declines, while those to the European Union, the No.2 market, fell 9.7 percent, also the third straight month of declines.

China’s customs attributed the sluggish data to slowing domestic economic growth, weak external demand, firms’ high operating costs, the appreciation of the yuan and a worsening trade environment. But it also acknowledged the lack of extraneous factors in the figures.

“The arbitrage trade to Hong Kong has basically been curbed and the trade between mainland and Hong Kong dropped sharply,” said the customs in a statement on its website, www. customs.gov.cn.

Exports to Hong Kong grew 7.7 percent in May, down from a 57 percent surge in April.

China’s trade sector is key for jobs and an indicator on the domestic consumer mood, but its contribution to economic growth has been unsteady in recent years.

Net exports were a drag on growth for all of last year but became a contributor in the first quarter, adding 1.1 percent to gross domestic product growth between January and March, official data showed.

Editing by Jeremy Laurence

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