Thursday, December 11, 2008

China exports fall for first time in seven years

By Roland Lim, Channel NewsAsia | Posted: 10 December 2008 / Channel NewsAsia

China's exports fell for the first time in seven years in the face of a world recession.

Slowing demand led Chinese exports to decline 2.2 per cent in November, as compared to a 19 per cent gain in October.

Major economies slipping into recession has meant the demand for Chinese goods has been drastically slashed.

"Right now, what we're seeing is really a rapid contraction of the export sector, which accounts for something like 25 per cent of the economy, and this is one area that really shows concern," said the general manager of Fulbright Securities, Francis Lun.

There are also more signs of cooling on the foreign direct investment front.

FDI in China fell by more than 36 per cent in November from a year earlier.

FDI is one of the factors driving up growth in China's foreign exchange reserves, which total around US$2 trillion as at the end of September.

China's wholesale price inflation also collapsed for November.

Producer prices fell to two per cent, way below market expectations.

Lun said: "That is mainly due to a decline of fuel oil, in crude prices. I think that gives people hope the economic planners will change their policy from tight, austerity measures to a loose policy."

China's leaders are meeting this week to map out economic policy for next year, with the government struggling to shore up growth and jobs.

The mainland economy has slowed to nine per cent in the third quarter from 10.1 per cent previously.

This suggests that China could be in for a rough ride next year, with growth falling to a dangerously low level of seven per cent next year -- a rate not sufficient to keep up with the growing workforce.