Mike King, Special Correspondent | Apr 17, 2012 8:32AM EDT
China’s export sector has not turned recessionary and will recover later this year on the back of strong U.S. demand, according to Todd Lee, chief economist for IHS Global Insight China.
Exports from China’s ports increased just 7.7 percent year-over-year in the first quarter, down from the 20.3 percent annual growth in 2011 and the 26.4 percent year-over-year gain recorded in the first quarter of 2011.
“The exports slowdown is significant,” Lee said. “It’s the slowest export growth since 2009, but it is not a free-fall collapse.”
The General Administration of Customs said the value of China's foreign trade in the first quarter increased just 7.3 percent year-over-year to $859.4 billion, the slowest growth since the fourth quarter of 2009. Export-oriented provinces such as Guangdong, Jiangsu and Zhejiang experienced even slower growth than the national average, each posting growth rates of just 3 to 5 percent in the first quarter, according to GAC.
Drawing a comparison with the downturn during the 2008–09 financial crisis, Lee said China's PMI export orders diffusion index first dropped into the negative territory — below 50 — in July 2008. It then fell to 29.0 the following November and stayed in the below-50 zone for 10 consecutive months.
“By contrast,” he said, “during the current eurozone crisis China's export orders index only fell below 50 for five of the six months between August 2011 and January 2012, and has rebounded into the 50-plus zone since February.”
After noting overall goods exports had remained in growth territory, with only exports to the European Union contracting, and only by a marginal 1.8 percent in the first quarter, he predicted an exports rebound later in the year. “It is increasingly clear the ongoing eurozone debt crisis is unlikely to become a repeat of the 2008 U.S. subprime financial crisis in terms of its negative impact on global demand,” he added. “As we expect growth in the United States and emerging markets to gain some momentum during the rest of this year, Chinese exports should recover.”
China also is pushing to boost exports. The Chinese government has taken steps to ease the financial burden on small and medium enterprises, expand export credit insurance and stabilize the export tax rebate policy, while the 111th Canton Fair opened on Sunday in Guangzhou and is offering free admission to new buyers to attract more orders. Some 200,000 buyers are expected at the Fair, China’s largest export trade exhibition.
Zhong Shan, Deputy Minister of Commerce, said he hoped the fair would help push the country's foreign trade growth rate back above 10 percent.
Contact Mike King at michael@borderline.eu.com.