Emerging Markets Editor
Chinese exports and imports fell unexpectedly in November from year-earlier levels, dramatically illustrating how abruptly the world’s fourth-largest economy has slowed in response to the global credit crunch.
The country said its top priority in 2009 would be stable and fast economic growth amid ‘mounting difficulties,’ and vowed to use a broad range of policy tools to meet its goals.
The drop in exports was the largest since April 1999 while the decline in imports was the steepest since monthly records kept by bankers began in 1993.
Other Asian export power houses, including South Korea and Taiwan, had reported a drop in shipments last month as the shock to confidence that followed the collapse of Lehman Brothers in mid-September reverberated.
But analysts said the extent of the downturn in China was startling. Economists had expected exports to rise 15 per cent and imports to be up 12 per cent. But the data showed exports fell 2.2 per cent and imports dropped 17.9 per cent.
Gene Ma, an economist at China Economic Monitor, a Beijing consultancy, said: “Global demand for Chinese products is vanishing. The credit freeze in importing countries has made it hard for Chinese exporters to sell.”
Even though imports fell more sharply than exports, the trade surplus soared to an all-time high of $40.1billion last month, eclipsing the previous record of $35.2billion set in October, the customs administration reported.
A plunge in the price of oil and other commodities cut China’s import bill but economists said the drop reflected spreading weakness in home-grown demand as businesses and consumers battened down the hatches.
“It’s just a start. Exports and imports will continue to fall, probably until next June,” Zhang Shiyuan, an analyst with Southwest Securities in Beijing, said. Beijing said it would use stepped up public spending and a ‘moderately loose’ monetary policy to spur economic growth, according to state media. It will also make tax adjustments and maintain stability in its yuan currency.
The official media reports followed the conclusion of the annual Central Economic Work Conference, which brings top central and provincial government leaders together to map out economic policy for the coming year. President and Communist Party leader Hu Jintao and Premier Wen Jiabao addressed the gathering, outlining key issues facing the country.
China weathered the global crisis better than most but recent figures show it has been unable to escape the fall-out. China had a problem with inflation this year but a sharp drop in producer prices in November points to the potential for deflation, according to analysts.
The conference did not lead to the announcement of any specific new policies but the government reiterated its oft-stated pledge to expand domestic demand to help spur growth.
State television also said China would try to boost employment and subsidise low income families. Factories in southern China, the centre of the nation’s export sector, have closed this year as demand flags in key overseas markets.
China needs strengthened supervision of the financial sector, the state news said, without adding details. Closures of factories have led to fears of increased levels of bad debt at the nation’s banks.
The government has been unusually frank in acknowledging the economic downturn will cause unemployment.