China exports drop for first time in 17 months

Julian Harris
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CHINESE exports fell for the first time in 17 months in June, while a dip in imports also led to fears that the Asian giant’s economic growth is slowing.

Despite the disappointing trade data, released yesterday, shares on indexes in China and Hong Kong jumped, as traders speculated that the authorities may loosen their monetary stance.

The CSI300 of the leading Shanghai and Shenzhen A-share listings closed up 2.84 per cent yesterday, a peak not seen since 20 March.

And in Hong Kong the Hang Seng Index was up 1.07 per cent at close, its highest end price since 19 June.

Yet the overall outlook for China’s economy appears to be darkening. Annual GDP growth has fallen into single-digit territory in recent years as global economic problems drag on.

A survey of economists published over the weekend showed that growth in the second quarter of 2013, compared to the same period a year earlier, is expected to be 7.5 per cent.

Some analysts predict that annual GDP expansion in China will slow to around seven per cent. Chinese Premier Li Keqiang has previously warned that China’s rapid expansion could not continue at the same rate.

Exports dropped 3.1 per cent in June from a year earlier, figures revealed yesterday, the first decline since January 2012 and well below investors’ expectations. Imports into China also fell, by 0.7 per cent.

The downbeat data follows a crackdown by authorities in Beijing on the use of fake export documents to close a loophole for short-term money inflows that exaggerated export performance. “The surprisingly weak June exports show China’s economy is facing increasing downward pressure on lacklustre external demand. Exports are facing challenges in the second half of this year,” said Li Huiyong, an economist at Shenyin & Wanguo Securities in Shanghai.

Upcoming data will clarify China’s prospects. Beijing is due to post monthly money supply data at the start of next week, along with second quarter GDP. Data on monthly urban investment, industrial output and retail sales figures will also be published.