Exports slump, fuelling fresh fears for China's growth

China's exports slumped 15 per cent in March against a year earlier in a sharp reversal of the last two months' growth and raising the spectre of disappointing first-quarter economic growth.

Jitters about the slowing Chinese economy, for which Beijing has set a growth target of "about 7 per cent" this year, reverberate globally and have already helped dent commodity prices. As such, markets will be watching closely when the country releases its estimate for first-quarter gross domestic product on Wednesday.

The weak numbers also stoked expectations of further stimulus. "China's government will continue to ease domestic conditions, with a further cut in interest rates imminent," said Tom Orlik, chief Asia economist for Bloomberg.

China is buying less as well as shipping less: March imports fell 12.3 per cent compared with the same month last year.

The March trade figure, released by China's customs administration on Monday, contrasts with a 15 per cent year-on-year rise in exports - and 20 per cent fall in imports - for the first two months of this year.

January and February figures are combined to eliminate distortions from the lunar new year holiday, which can fall in either month.

"The domestic economy is facing increasing downward pressure as it enters a 'new normal'," said customs spokesman Huang Songping, referring to Beijing's catchphrase for an era of slower growth. "We cannot be certain of stable exports in the second quarter."

China's March trade surplus, at $3.1bn, also came in far below expectations after February's record $60.6bn trade surplus.

"Weak overseas demand and low commodity prices are affecting foreign trade," Mr Huang added. "The overall situation is severe and complicated. We will have to work hard to achieve our target for trade growth this year."

Overall, first-quarter export growth slowed to 4.7 per cent from a year ago - and 8.6 per cent on the previous quarter.

Economists reckon Beijing is likely to respond with further easing, although it faces a dilemma in doing so.

The central bank has cut interest rates twice since November in an attempt to spur economic growth, but is also wary of sparking capital flight as the dollar continues to strengthen on expectations of higher rates in the US.

"A weaker [renminbi] would be a double-edged sword with benefits to exports but a cost in increased risk of capital flight," Mr Orlik added.

The renminbi fell more than 2 per cent against the dollar last year and reached a 28-month low in early March before the central bank began to nudge the tightly controlled currency back upwards.

On a trip last week to China's heavily industrialised northeast, home to some of the country's slowest-growing provinces, Premier Li Keqiang warned local officials not to miss their economic growth targets. "People's job security and income improvements aren't castles in the air," Mr Li said, according to a government transcript of his remarks. "They must be bolstered by a certain speed of economic development."

Other analysts cautioned against reading too much into the March trade figures, which are frequently distorted by the Chinese new year holiday and have been further skewed this year by collapsing commodity prices.

"The first two months were abnormal because imports fell so much," said Bo Zhuang, China economist at consultancy Trusted Sources. Mr Zhuang estimates that as much as 70 per cent of the fall in imports was the result of much lower prices for oil, iron ore and other commodities.

He said that because of the collapse in import prices, China's first-quarter trade surplus was six times larger than for the same period last year.

Additional reporting by Wan Li in Beijing

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