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China’s weak foreign trade growth suggests more policy easing

Updated: Jan 13,2015 5:24 PM     Xinhua

BEIJING — China’s foreign trade increased 3.4 percent year on year in 2014 denominated in US dollars, significantly lower than the 7.6-percent rise in 2013 and the 7.5 percent target, indicating more room for monetary easing.

Denominated in US dollars, exports rose 6.1 percent in 2014, while imports increased 0.4 percent, Zheng Yuesheng, spokesman for the General Administration of Customs (GAC) announced on Jan 13.

Denominated in Chinese yuan, exports increased 4.9 percent to 14.3 trillion yuan, while imports fell 0.6 percent to 12.04 trillion yuan. The foreign trade surplus widened to 2.35 trillion yuan in 2014, an increase of 45.9 percent.

The leading export index slid for the third month to 40.1 in December 2014, the lowest since December 2013, and a pessimistic prospect for exports in 2015.

Zheng Yuesheng attributed the weak foreign trade growth in 2014 to a slow global recovery, less competitive Chinese made products, less foreign direct investment (FDI) in the manufacturing sector and falling commodity prices.

The average price of China’s iron ore imports dropped 23.4 percent in 2014, while crude oil and soy bean import slid 6.1 percent and 6.8 percent,respectively, Zheng said.

“With domestic demand still depressed, policy easing is still needed,” said Bob Liu, an analyst at the China International Capital Corp (CICC), adding that the government may set a lower export growth target for 2015.

Liu Ligang, chief Greater China economist at ANZ Banking Group agreed. that weak domestic demand and investment led to weak growth.

Trade with the European Union, China’s biggest trade partner, edged up 8.9 percent to 3.78 trillion yuan, while trade with the United States, the second-biggest partner, rose 5.4 percent to 3.41 trillion yuan. Trade with third-largest partner ASEAN, rose 7.1 percent to 2.95 trillion yuan.

Trade with Japan contracted 1 percent to 1.92 trillion yuan.

For 2015, economists believe that the foreign trade growth will continue the downward trend.

Bob Liu predicted that both export and import growth will fall in January, but export growth should still be much stronger than imports. The trade surplus is expected to remain high in January, before experiencing a seasonal decline in February and March.

His point was echoed by a research note from Merrill Lynch, forecasting that the elevated trade surplus could be sustained for several months on falling crude oil prices, while export growth could soften on a strong RMB.