Slump in China Exports, Imports Gathers Pace

Chinese exports and imports slumped in January for the third month in a row, underlining how badly the world's third-largest economy has been hit by the global financial crisis.

Greg Baker / AP A ship is seen unloading behind rows of containers at the new Yangshan deep water port off the coast of Shanghai, China, Thursday April 6, 2006. The port, which will be the world's largest deep water port when completed in 2020, is being built on an offshore island, with a 32.5 km long bridge across the sea connecting it to the mainland. The first phase of the project was completed and began handling cargo in November. (AP Photo/Greg Baker)

Exports fell 17.5 percent from a year earlier, after a 2.8 percent decline in December, while imports plunged 43.1 percent, twice as much as December's 21.3 percent year-on-year drop, the General Administration of Customs said on Wednesday.

The timing of the Lunar New Year holidays makes it hard to judge the severity of the underlying deterioration in trade as there were 17 working days this January compared with 22 in January 2008.

But the declines, which were sharper than expected, mirrored big falls elsewhere in the region and suggested to several analysts that the economy has yet to bottom out -- despite green shoots of recovery seen in rising metals prices.

"Basically, the economy is still weakening and fundamentals are still weakening, mostly due to the external shock," said Qing Wang, chief China economist with Morgan Stanley in Hong Kong.

"At least in the next quarter or two, the headwinds from weak external demand will be extremely strong, which is why we expect that overall economic growth will be worse before getting better," he said.

As a result of the weakness in imports, China notched up its second-biggest monthly trade surplus.

January's total of $39.11 billion was just shy of November's record of $40.1 billion and served as a reminder, ahead of this week's Group of Seven finance ministers' meeting in Rome, of the economic imbalances at the root of the global financial crisis.

Economists had expected a $28.7 billion surplus based on a 10.8 percent fall in exports and a 28.5 percent drop in imports from year-earlier levels.

Jun Ma, chief China economist at Deutsche Bank in Hong Kong, said the swoon in imports probably reflected underlying demand and pricing as well as statistical quirks connected to the Lunar New Year holidays.

More From CNBC.com

• US Market Insider: Bankers in the Hot Seat
• Charting Asia: Flying High & Falling at the Hedge
• Heller: Obama Plan Won't Help Immediately
• Tapping Asia's Bond Markets
• More Asia Pacific News

"On the surface, some people may say this is a negative indication of weaker demand, but I think that the more important factor to look at is what's going to lead towards the next few months' recovery," he said.

"Loan growth is definitely much, much more important than any other indicators for this month, and it's going to be massively higher than before," he said.

Copyright 2009 Reuters. Click for restrictions.