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China’s trade feeling the pinch of EU recession and US anaemic recovery

Thursday, May 10th 2012 - 20:26 UTC
Full article
Robust growth in the past few years was accompanied by a sharp rise in inflation and a surge in property prices Robust growth in the past few years was accompanied by a sharp rise in inflation and a surge in property prices

China's export and import growth slowed in April raising fears about a sharp slowdown in its economy and triggering calls for monetary policy easing. Exports rose by 4.9% in April from a year earlier, down from the 8.9% annual growth seen in the previous month, a sign that global demand may be slowing.

Meanwhile, imports rose just 0.3% on the year, down from 5.3% in March, indicating a fall in domestic demand. China has been trying to boost domestic consumption to rebalance its growth.

China's robust economic growth in the past few years was accompanied by a sharp rise in inflation and a surge in property prices. As a result, Beijing introduced various measures, including curbs on lending, to try to rein in consumer and property price growth.

While it has since eased some of those policies, analysts said the effects of the tightening were still being felt.

China's central bank has reduced the amount of money banks must hold in reserve twice in the past few months in a bid to increase lending. The hope is that more easily available credit will spur investment and boost demand. However, some analysts said that the government needed to ease its policies even further.

“If the government does not relax policies further, all factors that dragged growth down in the first three months will still remain in the second quarter,” said Jianguang Shen of Mizuho Securities Asia.

“China needs not only to loosen monetary policies: it also needs to relax curbs on local government financing vehicles and the property sector.”

Over the past few years China has relied heavily on the success of its manufacturing sector and exports to boost its economic growth. But economic problems in the key US and Euro zone markets have dented demand and hurt growth.

While there had been hopes of an economic recovery in those markets, recent data and developments have suggested that the recovery may take much longer.

In the Euro zone, the region's debt crisis fears have re-emerged after voters in France and Greece backed politicians who are opposed to state spending cuts.

In the US, jobs growth, which is seen as key to a recovery in the world's biggest economy, slowed in April. China's policymakers have also found it tough to boost domestic demand enough to offset lower growth in exports.

Given these issues, analysts say the recovery in China's trade is likely to be a very slow one.
 

Categories: Economy, International.

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