World Economy

China Trade Tumbles

China Trade TumblesChina Trade Tumbles

Customs officials in China have reported disappointing trade figures for the world’s second-largest economy. The report pointed to a slump in both exports and imports against the backdrop of sluggish demand.

Chinese exports dropped by a staggering 11.2% in January year-on-year to $177.5 billion as tremors in overseas markets and weakness of trading partners weighed on the Asian giant, DW reported.

The customs authority added that imports plummeted by 18.8% to $114.2 billion in the first month of the year, with the figures being far worse than expected by analysts.

“We believe the slump in trade growth mainly reflects weakening investment demand, possibly from weaker property investment and measures to reduce overcapacity,” Nomura economist Zhao Yang said in a statement.

Rock-bottom prices for commodities such as oil and slowing growth in infrastructure spending have hit China’s import values, while exports have primarily been hurt by frail overseas demand, along with rising labor costs and the increasing competitiveness of rival economies.

China’s leaders are in the process of retooling the economy to one focused a lot more on consumer spending, but the lack of investment in big-ticket infrastructure projects that had long fueled China’s growth is dragging on imports.

There’s no doubt, though, that the Asian country’s record surplus gives Beijing some breathing room to cope with the flood of cash that have flowed out of the nation in recent months, with market players expecting a further weakening of the yuan.

Meanwhile, the yuan hit a 2016 high on Monday, after the People’s Bank of China set its official midpoint rate sharply stronger against the dollar and the central bank governor talked up the currency.

The PBOC set the yuan at 6.52 per dollar prior to the market open on Monday, up from 6.53 on February 5, the final fix before the week-long Lunar New Year holiday.