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Chinese export growth slowed to 4.9 per cent year-over-year (YoY) in April, from 8.9 per cent the previous month. Expectations were for 8.5 per cent growth.Import growth also came in wide off the mark rising just 0.3 per cent YoY, against market consensus at 10.9 per cent.
Trade surplus however widened to $18.4 billion, from $5.4 billion in March, beating expectations.
Ting Lu, China economist for Bank of America-Merrill Lynch says there are three main factors behind the weak trade growth:
- An unfavorable ‘base effect’ since March/April 2011 growth was very strong, in part because of the Japanese earthquake in March 2011.
- Rising oil prices lowered new demand earlier this year and is showing up in import data now because of the lag between orders and customs clearance.
- There was one fewer working day in 2012 compared with last year.
The weak import numbers raised concerns that domestic demand had weakened, but Ting points out that some sub-data shows that China’s domestic demand is still resilient. For instance growth of iron ore imports in volume terms surged to 9.1 per cent YoY from 5.7 per cent the previous month:
“Overall, trade data in April could have a negative impact on the market. It particularly could rekindle concerns over China’s internal demand due to weak import growth, in our view. However, due to the existence of base effect and the large fluctuation of commodity prices, we suggest investors take these data with a grain of salt as they could be particularly noisy for a single month.”