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HONG KONG (MarketWatch) -- China's exports contracted at the fastest rate in more than a decade in January from a year earlier, while imports fell by an even wider margin, indicating further layoffs and output cutbacks could be in store for the world's third largest economy.
Exports declined 17.5% to $90.45 billion after declining 2.8% in December, according to data released Wednesday from the General Administration of Customs. The decline was the biggest in percentage terms since October 1998, according to calculations by J.P. Morgan.
Imports retreated 43.1% to $51.34 billion, following a 21.3% decline in the previous month.
Analysts said the figures misrepresent the true trade picture because of the annual Chinese New Year holiday, the most important on the Chinese calendar, which fell in late January.
Still, discounting the impact of the holiday, the emerging story still was one of deterioration in trade.
"We expect China exports will slow quite significantly in coming months," said Morgan Stanley's Chief Economist of Greater China, Qing Wang, in Hong Kong.
The economist had expected bleak figures after earlier shock results from Japan and South Korea, which indicated their export industries were in free fall.
"The headwinds facing the Chinese economy are still very strong, we are not going to see any significant improvement from current levels," Wang added.
The overall picture was of better times ahead, although the worst of the quarterly declines in trade and output were likely seen in the fourth quarter.
Wang forecast industrial output will rise 10% this year over 2008 as factories spark up assembly lines later this year January's trade surplus widened to $39.1 billion from $38.98 billion in December.
J.P. Morgan said there have been some indication heavy industries are restocking supplies of steel and copper, although there are few signs of a broader pick up in demand.
"The sharp contraction in imports reflects slowing domestic investment and lower demand for intermediate goods, and likely signals continuing export weakness in the future," J.P. Morgan said in research note emailed to reporters Wednesday.
The broker cautioned Chinese imports, which are typically comprised of 70% raw materials and capital goods, are likely remain weak for some time to come.
Another negative drag: Chinese companies are being encouraged to buy locally-produced supplies, J.P. Morgan said.
Merrill Lynch said the Chinese New Year holiday fell earlier this year than last, impacting the number of working days in January, and making comparisons with last year "close to meaningless."
"Simply ignore those numbers and focus on the combined figures for January and February instead," wrote Merrill economists headed by Ting Lu in Hong Kong, in note Wednesday.
Government data released yesterday showed sharp declines in wholesale prices and a flattening of rises in consumer prices, conditions that could provide the policy backdrop to justify further reductions in interest rates. See full story.
Consumer-price inflation eased to 1% from a year earlier, cooling from 1.2% in December, while wholesale inflation fell to negative 3.3%, extending a month-on-month declining trend since peaking at 10.1% in August, according to data released by the National Bureau of Statistics Tuesday.
http://www.marketwatch.com/news/story/china-exports-fall-january-fastest/story.aspx?guid={2BFF0552-6905-4CE2-9D74-29C043AD4367}&dist=msr_1
Exports declined 17.5% to $90.45 billion after declining 2.8% in December, according to data released Wednesday from the General Administration of Customs. The decline was the biggest in percentage terms since October 1998, according to calculations by J.P. Morgan.
Imports retreated 43.1% to $51.34 billion, following a 21.3% decline in the previous month.
Analysts said the figures misrepresent the true trade picture because of the annual Chinese New Year holiday, the most important on the Chinese calendar, which fell in late January.
Still, discounting the impact of the holiday, the emerging story still was one of deterioration in trade.
"We expect China exports will slow quite significantly in coming months," said Morgan Stanley's Chief Economist of Greater China, Qing Wang, in Hong Kong.
The economist had expected bleak figures after earlier shock results from Japan and South Korea, which indicated their export industries were in free fall.
"The headwinds facing the Chinese economy are still very strong, we are not going to see any significant improvement from current levels," Wang added.
The overall picture was of better times ahead, although the worst of the quarterly declines in trade and output were likely seen in the fourth quarter.
Wang forecast industrial output will rise 10% this year over 2008 as factories spark up assembly lines later this year January's trade surplus widened to $39.1 billion from $38.98 billion in December.
J.P. Morgan said there have been some indication heavy industries are restocking supplies of steel and copper, although there are few signs of a broader pick up in demand.
"The sharp contraction in imports reflects slowing domestic investment and lower demand for intermediate goods, and likely signals continuing export weakness in the future," J.P. Morgan said in research note emailed to reporters Wednesday.
The broker cautioned Chinese imports, which are typically comprised of 70% raw materials and capital goods, are likely remain weak for some time to come.
Another negative drag: Chinese companies are being encouraged to buy locally-produced supplies, J.P. Morgan said.
Merrill Lynch said the Chinese New Year holiday fell earlier this year than last, impacting the number of working days in January, and making comparisons with last year "close to meaningless."
"Simply ignore those numbers and focus on the combined figures for January and February instead," wrote Merrill economists headed by Ting Lu in Hong Kong, in note Wednesday.
Government data released yesterday showed sharp declines in wholesale prices and a flattening of rises in consumer prices, conditions that could provide the policy backdrop to justify further reductions in interest rates. See full story.
Consumer-price inflation eased to 1% from a year earlier, cooling from 1.2% in December, while wholesale inflation fell to negative 3.3%, extending a month-on-month declining trend since peaking at 10.1% in August, according to data released by the National Bureau of Statistics Tuesday.
http://www.marketwatch.com/news/story/china-exports-fall-january-fastest/story.aspx?guid={2BFF0552-6905-4CE2-9D74-29C043AD4367}&dist=msr_1