China's exports tumbled in February as the world's third-largest economy felt the full force of the global financial crisis, but capital spending accelerated in response to a massive government stimulus package.
With the world experiencing its deepest recession in decades, pessimists said the slump in exports was unlikely to end soon. Some said China could even record a trade deficit before long.
But optimists saw fresh hope in the more forward-looking investment data that China might pull out of its swoon faster than other major economies, thanks to the government's pump-priming and galloping credit growth.
Exports in February slid 25.7 per cent from a year earlier, dwarfing forecasts of a 5 per cent fall, while imports dropped 24.1 per cent, close to projections of a 25.0 per cent decline.
The resulting trade surplus was just $4.84 billion, a three-year low, compared with $39.1 billion in January and a record $40.1 billion in November, the customs administration said. Markets had expected a figure of $27.3 billion.
Shanghai shares fell 0.91 per cent in reaction to the trade data, bucking a regional rally, while the dollar recouped early losses and rose across the board
Chinese exporters had hitherto fared better than their competitors in places such as South Korea and Taiwan, encouraging conjecture that cost-conscious shoppers in the West were trading down to cheaper made-in-China goods.
The government estimates that 20 million migrant workers, who labour mainly in export factories and in construction, have lost their jobs so far because of a collapse in global demand and a slump in the domestic real estate market.
But figures released earlier by the National Bureau of Statistics suggested that the government is already enjoying some success in its drive to make up for the shortfall in exports by boosting capital spending.
Investment in urban areas in fixed assets such as roads, power plants and apartment buildings rose 26.5 per cent in January and February from a year earlier, easily beating market forecasts of a 21.5 per cent increase.
In all of 2008, urban fixed investment was up 26.1 per cent.
The combined number smooths out swings due to the Lunar New Year, which fell in January this year but in February last year.
Detailed figures showed the initial impact of the 4 trillion yuan ($585 billion) stimulus plan unveiled by Beijing on November 9th.
Spending on projects backed by the central government rose 40.3 per cent in the first two months, while investment in transport, including railways, rose a whopping 210.1 per cent.
In addition, bank lending is surging; cement and steel output rose 17 per cent and 2.4 per cent, respectively, in the first two months; the decline in power demand slowed; and car sales topped 800,000 in February for the first time in eight months.
But other figures suggest China is not out of the woods yet.
Inventories of raw materials such as coal have started to mount again; a rise in prices of steel proved to be short-lived; and investment in the glutted property sector was just 1.0 per cent higher than in the first two months of last year, the government said today.
Reuters