China reported a decline in both exports and imports in April, a reversal of figures the previous month that indicated a tentative revival in both external and domestic demand.
Data published on Sunday by the General Administration of Customs showed that exports fell 1.8 per cent year on year in US dollar terms. That exceeded a consensus estimate by TradingEconomics of a 0.1 per cent drop, and followed an 11.5 per cent surge in March.
Imports in April slid 10.9 per cent from the same month last year, more than double the consensus forecast for a 5 per cent drop and deepening the previous month’s 7.6 per cent decline.
China had a trade surplus in April of $ 46bn, versus $ 34bn a year earlier.
First-quarter gross domestic product figures last month suggested the economy was broadly stabilising after a slowdown in the second half of last year, growing at an annual rate of 6.7 per cent in January through March.
However, there are concerns that the improvement in China’s outlook is primarily to do with short-term stimulus measures as Beijing attempts to shift away from heavy industry and manufacturing for export towards a service-based economy fuelled by domestic consumption.
The International Monetary Fund warned last week that Asian countries are expected to suffer as a result of China’s rebalancing, and in particular that Chinese demand for imports from South Korea and Taiwan would drop.
China’s rebalancing accounted for a “big chunk” of China’s import slowdown in the past decade, the IMF said, attributing the slowdown to the reduction in investment and in exports, two sectors that intensively use imported intermediate goods.
“Component imports are soft, suggesting a dim outlook for manufacturing output and exports in the near term,” wrote Moody Analytics in a note. Exports of goods processed or assembled in China with foreign inputs fell 13.3 per cent year on year.
As the wages of its assembly line workers slowly rise, China’s economy is suffering the relocation of garment and technology factories to neighbouring Vietnam and Bangladesh.
Foreign-exchange reserves data, released on Saturday, showed that China’s reserves rose in dollar terms for the second month in a row, by $ 7.1bn to $ 3.2tn.
However, the increase was driven by a softening US dollar, which pushed up the value of China’s euro- and yen-denominated assets and thus the value of the overall pot in dollar terms.
Excluding the valuation effect, money is still flowing out of China though at a more moderate pace, with a net forex outflow of $ 13.3bn in April, less than March’s $ 37.0bn, according to estimates from researchers at China International Capital Corporation.
The narrowing of foreign reserve outflows suggests the central bank is confident enough in the strength of the Chinese currency to ease off its intervention to support the renminbi. The renminbi has risen 14.8 per cent against the dollar since hitting a trough for the year on January 8.
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