MercoPress. South Atlantic News Agency

Fears of sharp slowdown of the Chinese economy as imports keep sliding

Factory output growth below 10% for the fifth month running

China's exports grew less than forecast and imports fell in August, adding to fears about a sharp slowdown in its economy. Exports rose by 2.7% from a year earlier as global demand continued to remain subdued. Imports fell 2.6% from a year ago, indicating a decline in home grown consumption.

China has been trying to boost domestic demand in a bid to rebalance its growth and offset slowing demand for exports. Analysts said that the fall in imports indicated that domestic consumption was not growing fast enough.

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

“We've now pretty much got the full batch of August data and it's clear that the slowdown pressure is growing.”

The data comes just a day after Beijing said that industrial production grew at its slowest pace in more than three years in August. Output rose by 8.9% from a year earlier, data released by the National Bureau of Statistics over the weekend showed.

China's manufacturing sector has been one of the key drivers of its growth over the past few years. However, a decline in demand for Chinese exports from key markets in the US and Europe has hurt growth in the sector.

Growth in factory output has stayed below 10% for five straight months now, the longest such streak since the global financial crisis. Analysts said that slowing growth in the sector was a big concern.

“With the industrial production growth continuing to slump, there are now fears that earlier expectations that economic growth may pick up in the second half of the year, may not be realised,” said Alistair Thronton of IHS Global Insight in Beijing.

The latest set of weak data has raised hopes that China's policymakers will introduce fresh measures to boost the economy. Last week, Beijing approved infrastructure projects worth more than 150bn dollars, its latest step to try to spur a fresh wave of economic development.

China has already cut interest rates twice since June this year, to bring down the cost of borrowing for consumers and businesses.

It has also lowered the reserve ratio requirement which is the amount of money banks must keep in their reserves, three times in the past few months, in a bid to boost lending.

Analysts said that given the slowdown in key sectors and the continued gloomy outlook for the global economy, Beijing may ease its policies further in the near term.

“The conditions have become increasingly ripe for one or two more reserve ration requirement cuts and a probable interest rate cut later,” Louis Kuijs, chief China economist at Royal Bank of Scotland told the BBC.

However, he said that stimulus measures taken by Beijing will be less significant than those introduced by China after the global financial crisis in 2008 and 2009. (BBC).-