China Exports Slump as Global Demand Shrinks

By Mark Magnier at The Wall Street Journal

BEIJING—China’s exports fell in October for the fourth consecutive month, as a once-powerful engine of the country’s growth continued to sputter in the face of weak global demand.

The world’s appetite for goods from China—the world’s second-largest economy accounts for nearly one-fifth of global factory exports—has been lower than expected this year. Meanwhile, weak domestic demand continues to reduce imports. Both are contributing to China’s growth slowdown. “The mix of the data is again not encouraging,” said Commerzbank economist Zhou Hou. “Trade momentum is unlikely to turn around in the near term.”

Sunday’s results suggest the export scene is worsening. China’s General Administration of Customs said October exports fell 6.9% year-over-year in dollar terms, after a drop of 3.7% in September. The October figure was worse than the median 4.1% decline forecast by 11 economists in a survey by The Wall Street Journal.

Imports in October fell by a sharper-than-expected 18.8% from a year earlier, after a 20.4% fall in September. China’s trade surplus widened in October to $61.64 billion from $60.3 billion in September. China’s Commerce Ministry said Thursday in a report that exports are likely to see little increase in 2015, while imports will likely report a “relatively big” decline as falling commodity prices continue to weigh on trade flows.

China’s rising labor and land costs in recent years have weakened the competitiveness of the nation’s exporters, the Commerce Ministry said. The average wage for workers in coastal provinces, including the manufacture hub of Guangdong province, has reached $600 a month, twice the level of Southeast Asian countries.

Promo Solution, a stationery and gift exporter to North America, Europe and Japan, said in the face of mounting competition, it is targeting the U.S. market. “But it’s tough,” said Jin Bo, the company’s executive general manager. “Step by step, we’re trying to move into higher-end products so we can improve our margins,” he added.

China has set a 6% year-over-year trade growth target for 2015 that it looks likely to miss. That compares with a 7.5% trade-growth target in 2014, which it missed by more than four percentage points.

China is on track for a record trade surplus this year, which should give some support for the yuan, said Macquarie economist Larry Hu. China has tried to prop up the Chinese currency’s value as slowing growth and a surprise August devaluation prompted investors to bet that more weakening was in store.

The overall trade figures suggest more weakening in a year when China is already set to post its slowest annual growth rate in a quarter century. Improvement in the Chinese economy will ultimately depend on stronger domestic demand and an improvement in the property sector, Mr. Hu added.

On Saturday, China’s central bank reported that foreign-exchange reserves in October rose by $11.39 billion to $3.526 trillion, ending a five-month streak of monthly declines. Economists said it signaled weaker expectations among investors that the yuan would depreciate further.

Exporters at the massive Canton Trade Fair in southern Guangdong province this month said the recent modest depreciation of the yuan has provided little relief.

“A lot of Westerners think this helped us out a lot,” said Chen Shuming, sales manager with Fujian Furniture Industry & Trading Corp. “But the 2% depreciation actually hurt us. It was in every newspaper and customers called us within hours pushing for 6% discount, so we had to give them 4%,” he said.

The continued slump in Chinese imports reflects weak domestic demand, falling commodity prices and currency shifts that have tended to overstate the drop in dollar terms, economists said. While the value of China’s imports declined by 15% year on year in the first nine months, volumes fell 4%.

Source: China Exports Slump as Global Demand Shrinks - Wall Street Journal

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