The world’s second largest economy grew less than predicted in August as exports fell and fears grow that the country is set to face a sharp slowdown in its economy.
China’s exports rose by 2.7% compared to the same time last year as global demand continues to remain subdued. Home-grown consumption for foreign goods fell with imports coming into the country dropping 2.6%.
“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 disappointing data comes after yesterday’s announcement that Chinese industrial production grew at its slowest rate in more than three years in August. Despite the negativity over the figures the country still blew many Western economies out of the water in terms of growth. Industrial output still rose by 8.9% from the previous year.
Declines in demand from the US and Europe has hurt Chinas burgeoning economy with factory growth staying below the 10% mark for five months, the longest streak since the global financial crisis began.
China’s trade surplus widened in August to $26.7 billion from $25.1 billion in July on falling imports, surpassing a median $17.2 billion forecast by 11 economists in a Wall Street Journal survey. Imports fell 2.6% from a year earlier, comparing with a median forecast of a 3.4% increase.
“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 weak data has the markets hoping that the Chinese government will introduce fresh monetary measures to boost the economy. Beijing has approved infrastructure projects worth more than $150billion in an effort to spur a new wave of development. Plans for new construction projects such as new road networks and buildings are expected to bolster the nations slowing construction sector. The government has already cut interest rates twice in a bid to bring down the cost of borrowing for consumers and businesses.
China’s slowing growth is of particular concern to Australia as it is its biggest trading partner. Australia’s currency has weakened in the past week due to slowing demand for iron ore and other commodities, the majority of which are exported to China.
“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.
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