Why China’s Imports Slowdown Isn’t as Bad as It Seems
Assistant Producer, CNBC Asia
Import growth in the world’s second largest economy decelerated sharply in June, but economists tell CNBC that the slowdown is temporary and forecast a pick-up by the fourth quarter driven by recent policy easing.
Chinese import growth slowed to 6.6 percent over the previous year in June, half the 12.7 percent pace forecasted by analysts. Export growth, however, outpaced expectations, rising 11.3 percent against a forecast for a rise of 9.9 percent.
Asian stocks dipped following the release of the data, but losses were limited with the Hang Seng , Shanghai Composite and S&P ASX-200 indices down between 0.3 and 0.6 percent.
Shuang Ding, Senior China Economist at Citi Investment Research says the decline in imports is due to lower commodity and because Chinese buyers have been stocking up on commodities in recent months and are now sitting on larger inventories.
China's copper and crude imports, for example, fell 17.5 percent and 15 percent respectively in June from a month earlier.
“It will take a few months for China to run down the stocks. But infrastructure investments by the government and social housing projects will lead to a rise in demand for raw materials in the second-half,” he said.
Sun Junwei, Beijing-based economist at HSBC agrees that the slowdown in import growth will be arrested towards the end of the year, as the government’s recent monetary easing such as interest rate cuts kick in to support domestic demand.
Shuang and Sun note that weaker import data are not a reflection of a weakening in spending by Chinese consumers. Unlike in the United States, imports into China are largely made up of raw materials used for manufacturing or infrastructure projects.
“The consumer seems to be quite stable if you look at the retail sales numbers, employment is holding up and we are seeing wage increases,” Shuang said.
Exports to Fall Further
Sun says while China could surpass its annual target of 10 percent growth in imports this year, the country will likely miss its export growth target of 10 percent.
“In the first-half, we achieved around 9 percent export growth, but we think 10 percent for the full year is challenging if you look at the U.S.; consumer spending is likely to slow, while Europe is still going to be in a mild recession. The risk is to the downside for exports,” she said.
Sun forecasts export growth for 2012 will be around 8-9 percent.
Shuang agrees that exports will remain under pressure, pointing to the new export orders in June, which tumbled to lows seen in March 2009, according to the HSBC Purchasing Managers Index (PMI).
“We don’t see exports picking up later in the year. Export growth could drop to the single digits next month. We aren’t optimistic about external demand,” he said.
By CNBC’s Ansuya Harjani