China exports fall

May 12, 2009

, BEIJING, May 12 –  China\’s efforts to boost domestic demand to fight the global financial crisis showed strong signs of success Tuesday, with investment in infrastructure rising as exports fell.

Analysts said the impact of a four-trillion-yuan (580-billion-dollar) package unveiled in November to stimulate demand at home had started to be felt as China moves towards an investment-heavy growth model.

Exports fell 22.6 percent in April to 91.9 billion yuan from a year earlier in the sixth straight monthly decline, according to figures from the customs bureau.

But urban fixed asset investment, an indicator of the government\’s progress in lifting growth by funding infrastructure projects, was up 30.5 percent in the first four months of 2009, the National Bureau of Statistics said.

According to research firm Moody\’s, this represented the highest rate of growth since July 2006.

"This very obviously shows that domestic demand is quite good because of the fiscal stimulus package, and external demand is still too weak," said Xu Jian, a Beijing-based economist at China International Capital Cooperation.

China\’s massive export machine — a main driver of growth over the past three decades — was battered late last year as the global financial crisis hurt overseas demand.

The slowdown has led to the closure of thousands of exporting factories in the country\’s manufacturing heartlands, and, according to government data, at least 25 million migrant workers from poor rural areas are now unemployed.

Figures released by the statistics bureau showed that funds for fixed asset spending in China have come overwhelmingly from domestic sources so far in 2009.

Investments by domestic enterprises in the first four months of the year were up 34.6 percent, while investment by foreign businesses in the same period was down 1.2 percent, it said.

According to the customs data, China\’s exports in April rose 6.9 percent compared to March, and imports increased 15.1 percent.

Glenn Maguire, chief economist for the Asia Pacific region at Societe Generale, said this was consistent with an economy that was being driven by very strong fixed-asset investment growth.

"As China moves to an investment- and infrastructure-heavy growth model, what we are seeing is the economy is sucking in imports to meet that," he said.

The statistics bureau also said that spending on new projects increased by 90.7 percent in the first four months of the year.

This suggested "that aided by the fiscal stimulus, total fixed investment is still likely to rise solidly in coming months," said Qian Wang of JP Morgan.

But Matt Robinson, an economist at Moody\’s, cautioned that the strong growth in investment was not necessarily the sign of a good economic outlook.

"Strong stimulus spending and a surge in new loan approvals appear to be driving the strong growth in investment, rather than a healthy economic outlook," he said in a research note.

The customs bureau highlighted Tuesday a slight improvement in the situation, saying the drop in trade in April had slowed by 1.9 percentage points compared to that of the first three months of the year.

Xu said that he expected exports to gradually improve towards the end of the year.

"But in the future, the government will definitely focus their policy more on consumption, as it knows its economy is imbalanced," Xu said, adding that this would take time.

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