BEIJING, China – China’s exports plunged by an unexpectedly large 18 per cent in February, possibly denting hopes trade will help drive the slowing economy while communist leaders push ambitious promised reforms.
Exports declined to $114.1 billion while imports rose a stronger-than-expected 10.1 per cent to $137.1 billion, customs data showed Saturday.
Weakness in key European and U.S. export markets could raise the risk of politically dangerous job losses in trade-reliant industries that employ millions of workers at a time when communist leaders want to focus on restructuring China’s economy.
China’s official 2014 economic growth target of 7.5 per cent, announced this week by Premier Li Keqiang, assumes trade also will grow by 7.5 per cent. But customs data show combined imports and exports so far this year have shrunk by 4.8 per cent.
The ruling Communist Party is trying to reduce reliance on trade and investment to drive growth by promoting domestic consumption and giving market forces a “decisive role” in the economy. A surge in job losses could force them to shore up growth with a stimulus based on state-led investment, setting back their reform effort.
China’s trade data can be distorted by the Lunar New Year holiday, which falls at different times in January and February each year. But even grouping together the first two months of this year still showed exports fell 1.6 per cent from a year earlier, while imports rose 10.1 per cent.
This year’s data also were expected to be unusually weak because during the comparison period in 2013 exporters were believed to be inflating sales figures as an excuse to evade currency controls and bring extra money into China for investment.
Despite that, the decline in February trade far exceeded forecasters’ expectations of a contraction in low single digits. They also expected imports to grow by a similar small margin.
The official economic growth target looks unusually ambitious after last year’s expansion rate fell to a two-decade low of 7.7 per cent. Manufacturing weakened in February and an HSBC Corp. survey showed employers cut jobs at the fastest rate in five years.
The finance minister said this week that growth as low as 7.2 per cent would be acceptable and Beijing’s priority is creating jobs. Plans call for creation of 11 million jobs but the minister said as many as 13 million might be possible.
China’s global trade balance swung to a deficit of $23 billion. The country often runs a trade deficit for one or months early in the year as factories restock following the Lunar New Year shutdown.
The surplus with the 27-nation European Union, China’s biggest trading partner, narrowed by 22 per cent to $4.1 billion. China’s trade surplus with the United States narrowed by 36 per cent to $7 billion.
A plunge in global demand in mid-2013 prompted Beijing to launch a mini-stimulus based on higher spending on railway construction and other public works. Growth accelerated but quickly faded once the government spending ended.
Since then, Chinese leaders have said there is little that additional stimulus can do to spur growth and improvements will have to come from longer-term reforms.