Analysis: China's "severe" export outlook

Mon Dec 19, 2011 9:19am EST
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By Emily Kaiser, Asia economics correspondent

(Reuters) - China could record a rare trade deficit next year, which would test both Beijing's resolve to go slowly on policy easing and its trading partners' ability to adapt.

The first quarter is shaping up to be especially tough because of slow European and U.S. demand, coupled with the normal spike in imports that comes with the celebration of Chinese New Year, which this year starts in late January.

Zhiwei Zhang, a Nomura economist based in Hong Kong, expects China to import $28.8 billion more than it exports during the first three months of 2012, dwarfing the $1 billion deficit posted over the same period this year. That quarterly deficit was the first since 2004, and China has not recorded a full-year shortfall in two decades.

Chinese Commerce Ministry officials have been warning for weeks that the trade outlook is "very severe.

Slowing exports are part of the reason why many economists think China's economic growth will dip below 8 percent, at least in the first half of 2012, if not the full year. The 8 percent mark is considered the minimum growth rate needed to create enough jobs to keep up with a growing urban population.

But it may not be such a terrible thing for the world.

"Looking from a global perspective, China's shrinking trade surplus should be seen as a welcome development, as evidence that China has made progress in boosting its domestic demand relative to exports," said Tao Wang, China economist at UBS, based in Hong Kong.

SOFTLY, SOFTLY   Continued...