China’s Exports Probably Declined Most in a Decade in December

By Li Yanping

Jan. 9 (Bloomberg) -- China’s exports probably fell the most in a decade in December amid a deepening global recession, making it more likely extra measures will be implemented to stimulate growth.

Shipments from the world’s fourth-largest economy dropped 5.3 percent from a year earlier after tumbling 2.2 percent in November, according to the median forecast of 16 economists surveyed by Bloomberg News. The customs bureau may release the figures as early as today.

Consumer confidence has tumbled to a 15-year low in Europe, China’s largest market, as the global economy grapples with the most severe downturn since the Great Depression. Profits have slumped at manufacturers with operations in China, such as Hon Hai Precision Industry Co., the world’s biggest contract maker of electronics.

“Exports won’t recover any time soon because of deeper recessions in major economies,” said Xu Pingsheng, an economist at the State Information Center in Beijing. “It’s almost certain the contribution exports make to growth this year will be zero or even negative,” said Xu, who expects shipments to fall as much as 17 percent in 2009.

China has increased rebates as incentives for sales abroad every month since October, pledged more export loans, and stalled its currency’s gains to aid exporters. The Chinese currency advanced just 0.5 percent against the dollar in the second half of last year from a pace of 6.6 percent in the first six months, according to Bloomberg data.

Still, growth in exports to the U.S. eased to 9.6 percent in the first 11 months of 2008 from 15.2 percent a year earlier, as demand for made-in-China shoes, clothes and plastic products fell, the customs bureau said in a report on Jan. 4.

‘Withering’ Demand

The expansion of total imports and exports may slow to less than 5 percent this year as “withering external demand imposes a strong constraint” on China’s overseas sales, the bureau said, estimating trade may have grown about 18 percent in 2008.

Shanghai Haixin Group Co., a Chinese textile exporter, said last month it may post its first annual loss since listing in 1994 because orders from overseas declined.

“Export growth of 20 percent to 30 percent is unlikely to return in the next few years because the biggest source of demand, U.S. consumers, are changing from spending to saving,” said Yuwa Hedrick-Wong, a Singapore-based economic advisor at MasterCard Inc. “China will face unprecedented challenges in terms of looking for new sources of economic growth.” Export growth averaged at 30 percent annually between 2003 and 2007, government data show.

Stimulus Package

China on Nov. 9 announced a 4 trillion yuan ($585 billion) investment package until 2010 and lowered the benchmark lending rates five times since September to spur domestic demand and make up for weaker exports, which account for one fifth of the nation’s expansion.

Still, economic growth may slip to as little 5 percent this quarter, almost half the 9 percent pace reported in the third quarter, according to Citigroup Inc. The World Bank expects 7.5 percent growth in 2009, the smallest gain in almost two decades.

“It will be very difficult for the government to achieve its ‘protecting-8-percent’ target if recessions in major economies extend,” said Xu from the State Information Center, an affiliate of the top economic planning agency, the National Development and Reform Commission.

China needs growth of at least 8 percent to create enough jobs for the 20 million workers entering the urban workforce annually and ensure social stability. The nation will face a “grim” job situation this year as the economy cools, labor minister Yin Weimin said on Nov. 26.

Almost half of China’s toymakers shut their businesses in the first 11 months as overseas shipments plunged, according to customs data. In 2008 more than 10 million migrant workers had lost their jobs as of the end of November, Caijing Magazine reported Dec. 17, citing an unidentified labor ministry official.

Imports may fall by 20 percent in December from a year earlier, according to the economists surveyed by Bloomberg. That will result in a trade surplus of $34 billion for last month.

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net