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Friday, February 10, 2012

China's exports and imports dip raising growth concerns

The manufacturing and export sectors are key drivers of growth in China

China's exports fell in January, the first decline in more than two years, raising fresh concerns about the impact of a global slowdown on its economy.

Exports fell 0.5% from a year earlier amid sluggish global demand. Shipments were also hurt as factories were shut during the Lunar New Year. 

Meanwhile, imports dipped 15.3% raising fears about slowing domestic demand. 

China has been trying to boost domestic consumption in a bid to offset slowing exports and rebalance its economy.

'Particular attention'
 
Analysts said while the closure of establishments during the Chinese New Year affected the numbers, the decline could not be attributed to the festival alone.

They said that the bigger-than-expected drop, especially in imports, was worrying as it gave an indication of slowing growth. 

"The collapse of imports begs particular attention," said Ren Xianfeng of IHS Global in Beijing. 

"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." 

Earlier this month, the China Federation of Logistics and Purchasing reported that the import index for January fell to to 46.9 from 49.3 in the previous month, showing slowing demand at home.

Despite these numbers, analysts said the dip was likely to be short-lived and imports may start to rise in the coming months.

'Biggest risk'
 
The export sector has been key to China's economic growth in the past few years as global firms have turned to Beijing to take advantage of its low-cost manufacturing. 

However, a slowdown in the US and the eurozone, which are two of the biggest markets for Chinese goods, has seen the pace of growth of shipments slow in recent months.

The debt crisis in the eurozone and high rate of unemployment in the US have hurt consumer confidence and dented demand for Chinese goods. 

Official figures on Friday showed that bilateral trade between China and the European Union fell more than 7% in January.

Analysts said the ongoing debt issues in the eurozone were the biggest threat to China's growth.

"We believe the major drag and biggest risk to China's growth in 2012 is weaker external demand caused by the ongoing eurozone debt crisis," said Ting Lu of Bank of America Merrill Lynch in Hong Kong. 

"Our European economists expect a moderate eurozone recession at -0.6% in 2012, while nobody knows the exact probability and severity of a collapse of the eurozone."

Source: http://www.bbc.co.uk/news/business-16977202

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