In January China saw a hefty decrease in imports–15.3%–considerably larger than could be explained away by Lunar New Year factory shutdowns. That, coupled with a drop in exports, led to concerns among analysts that Chinas economy could be slowing considerably more than expected.
While Reuters reported that the drop in exports was nowhere near that in imports, hitting 0.5%, it was still the worst tally since November 2009. Ren Xianfeng, an economist at IHS Global in Beijing, was quoted saying, “A fall of over 15% in January cannot be entirely explained by the lunar calendar, and adds weight to the view that economic output is slower than headline indicators might suggest.”
Because of the effect Lunar New Year has on the Chinese economy, however, policymakers will likely not react hastily, opting instead to take a longer-range view of markets. Analysts believe they will look at combined data for the first two months of the year before deciding whether to continue monetary easing.
The changes in import and export levels resulted in a trade surplus of $27.3 billion for January. That is the largest surplus in six months. Exports to China’s main export market, the European Union, also fell 3.2% in January from January 2011. That is its first decline since February of last year. Even exports to the U.S. are not rising at their usual rate, recording only a 5.5% gain in January year over year and dropping considerably from 11.9% in December.
Still, because factories either shut down or cut production in half during the week of the Lunar New Year celebration, data can be distorted. In a statement, Sun Junwei, economist at HSBC Global Research in Beijing, said, “The drop in both January exports and imports is not drastic enough to trigger any aggressive move in monetary policy. The decision makers may probably look at more indicators for February and other data such as foreign exchange purchase positions to gauge the policy stance.”