Overseas demand buoys Chinese economy in spite of slowing growth

CHINA REBOUNDED to an export-led trade surplus of €4.1 billion in March, as rising global demand lifted overseas sales and helped to offset a slowdown in the Chinese domestic market.

Exports grew by 8.9 per cent year-on-year in March, compared with 18.4 per cent growth in February and average growth of 6.9 per cent in the first two months of the year.

Trade was one of the factors putting a brake on economic growth last year as the world’s second biggest economy turned in its slowest rate of growth since 2009, at 9.2 per cent. Growth in each quarter in 2011 was weaker than in the previous three months. Full-year growth this year is expected to come in at just over 8 per cent.

In February, China registered a deficit of €24 billion, and trade had been expected to remain around €1 billion in the red. However, data from the customs office showed that strong sales growth in the US helped a faster-than-expected rise in exports.

In the first quarter, China’s imports and exports expanded 7.3 per cent from a year ago to reach €657 billion, with its foreign trade with major trading partners growing in single-digit percentages.

“Compared with foreign trade elsewhere, China’s imports and exports were relatively good in the first quarter,” Zheng Yuesheng, head of the statistical department of the General Administration of Customs (GAC), told the Xinhua news agency.

However, he said China’s foreign trade had grown at a much slower pace than the previous year, which showed there was underlying downward pressure at play. “March’s trade figures from China paint a picture of slow but steady growth in global demand, alongside further weakening at home,” said Mark Williams, chief Asia economist at Capital Economics.

While this was better than expected, Europe remains weak, although the US was providing a lift. China sold more to the US than to the EU for a second month – Europe had been China’s largest export market every month since June 2007.

The weakness appeared to be broad-based, he said, as imports for processing and re-export had been flat for some time, implying that exporters had low expectations for future orders growth.

“Non-commodity imports for domestic use – the best indicator in the trade figures in our view of underlying Chinese demand – have fallen back sharply since November,” said Mr Williams.

Diana Choyleva from Lombard Street Research said, in a research note, that the March data provided temporary relief on the export front, as they rose 3.3 per cent in the first quarter after 2.2 per cent and 0.5 per cent falls in the fourth and third quarter last year.

“But looking ahead, prospects remain bleak. Euroland is in recession that is likely to get deeper, while the US economy may grow at close to its trend, but is unlikely to be a global growth locomotive.”