Weak China trade data raises Beijing spending stakes

Mon Sep 10, 2012 6:58am EDT
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By Nick Edwards

BEIJING (Reuters) - Weak Chinese trade data on Monday underlined the likelihood of more Beijing-backed spending to deal with the damage done to the domestic economy by firms cutting production, inventories and imports in the face of anemic global demand.

Imports fell 2.6 percent on the year in August, confounding expectations of a 3.5 percent rise. Exports grew 2.7 percent, below forecasts for a 3 percent rise in a Reuters poll.

Such weak data is grim news in a country where exports generate 25 percent of gross domestic product, support an estimated 200 million jobs and where analysts already expect the economy to have its weakest year of expansion since 1999.

"The import surprise on the downside is very unusual. It is an alarming sign for the government and they probably saw it coming," Zhang Zhiwei, chief China economist at Nomura in Hong Kong, told Reuters.

"We've now pretty much got the full batch of August data and it's clear that the slowdown pressure is growing and that the government is feeling the need to act. I think there will be further easing in the months ahead."

Some economists fear the outlook is so poor that China may miss its official 7.5 percent growth target for 2012 without a fresh round of swift policy stimulus on top of the monetary and fiscal easing undertaken since last year and the $150 billion-worth of infrastructure projects announced last week.

The numbers - despite a bounce in the trade surplus in August to $26.7 billion - will solidify market expectations for further stimulus and monetary easing to support growth as China heads towards a once-a-decade leadership change later this year.

The trade data was some of the worst since the depths of the global financial crisis and underline President Hu Jintao's weekend warning to leaders of Asia-Pacific economies of the "grave challenges" facing global growth.   Continued...

An employee walks past shipping containers at a port near Yangtze River in Wuhan, Hubei province July 10, 2012. REUTERS/Stringer