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China's trade engine probably remained inverted in January, with imports and exports falling for the second month in a row, adding to concerns that the economy may be threatened by a more pronounced slowdown.
China is the world's largest trading nation and investors and international policymakers will closely monitor the magnitude of the decline as concern grows over slowing global demand.
Imports are expected to have declined 10.0% in January from a year earlier, which would be the biggest drop since July 2016, according to the median estimate of 30 economists in a Reuters poll. This compared to a 7.6% decline in December.
"Weak imports suggest we should pay attention to the possibility that the Chinese economy will slow more sharply than expected," said Mark Williams, chief economist at Capital Economics.
Chinese exports in January also probably declined, but not as much. Outbound shipments are expected to have declined 3.2% from the previous year, compared with the 4.4% decline recorded the previous month.
A new round of Sino-US talks began Monday in Beijing as the two largest economies in the world redoubled their efforts to defuse their deadly trade war. Negotiators are trying to reach an agreement before March 1, when US tariffs on Chinese imports worth $ 200 billion are expected to rise from 10 percent to 25 percent.
Most badysts believe that an additional suspension of higher rates will be the most likely outcome of the negotiations. Existing rights will remain largely intact for some time, which will maintain pressure on Chinese exporters while avoiding a hard blow in the near term.
According to a poll by Reuters, China's overall trade surplus would have fallen sharply from $ 57.06 billion in January to $ 33.5 billion in January.
However, badysts warn that Chinese data for the first two months of the year should be treated with caution due to trade distortions caused by the Lunar New Year holiday schedule, extended in mid-February 2018 but which began in February. 4 this year.
Estimates for January imports and exports therefore fell in an unusually wide range.
LOW TECHNICAL IMPORTS
Most respondents indicated a contraction in imports in January, with the lowest forecast forecast for a drop of 20.1%.
Chinese domestic demand had already weakened before Washington and Beijing began to impose equal tariffs on reciprocal exports in early 2018.
A multi-year regulatory crackdown on risky credit and debt practices has led to increased corporate financing costs and a stranglehold on access to credit that has never been easier, affecting a wide range of issues. private companies. Investment growth at one point reached a record level.
Many badysts said the contraction in Chinese imports was mainly in the technology sector.
Taiwan and South Korea have been the hardest hit so far, due to their high exposure to China and technology. Taiwan saw a sharper drop in orders from China in December, while South Korea's exports fell for a second consecutive month in January, as falling demand from China weighed on prices of bullets. memory.
"Even if uncertainties over US tariffs could have suppressed Chinese technology imports, supply chain effects would account for no more than half (probably only 20%) of the recent drop in imports. in technology, the rest reflecting mainly weak domestic demand "Goldman Sachs said in a note.
Much weaker data ahead of the annual parliament meeting in March may suggest that Beijing could accelerate or intensify its stimulus efforts after a series of measures that badysts said last year were modest by Chinese standards.
Policymakers have accelerated their infrastructure projects and lowered import tariffs to revive domestic demand, but it will take time for these measures to materialize and many badysts believe the economy will not stabilize before the middle. of this year.
Gross domestic product could rise 6% in the first quarter from the previous year, according to a commentary in Economic Information Daily, down from 6.4% in the fourth quarter of 2018, the fastest pace in the world. weaker since the global financial crisis.
Full-year GDP could increase by 6.3 percent, the state-controlled newspaper said Monday.
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