China March exports tumble 6.6%, worse than expected

Why I still expect Chinese stimulus: Expert

China's exports tumbled for a second straight month in March while imports unexpectedly slumped, heightening concerns over the health of the world's second-biggest economy.

Exports fell 6.6 percent from the year-ago period, official data showed on Thursday, missing a Reuters forecast for an increase of 4 percent and after plunging 18.1 percent in February.

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Imports fell 11.3 percent on year, compared to a Reuters forecast for a 2.4 percent increase and after rising 10.1 percent in February.

This leaves the country with a trade surplus of $7.7 billion for the month, the Customs Administration said.

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But the country's customs bureau added that exports would likely fare better in the second quarter as external demand improves and remains optimistic about achieving this year's 7.5 percent trade growth target.

Asian markets appeared to take the news in stride. The Australian dollar, which is sensitive to China data due to the country's strong trade links with the mainland, eased slightly from fresh five-and-a-half-year highs hit earlier, trading at $0.9414. While regional stocks were mixed after opening higher, but there wasn't a dramatic selloff.

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According to Louis Kuijs, chief economist of Greater China at RBS, distortions in data could have affected the figures, making the trade picture look worse than in reality.

"On the export side, the data is heavily affected by heavy invoicing that took place a year ago and that actually peaked in March. If you correct that, you would actually get positive export growth in March," said Kuijs.

RBS: China exports hurt by invoicing issues

On import side, we also had a lot of issues with very aggressive buying by Chinese firms of commodities. We now have an over-hang of that and commodity imports are coming down because of the involuntary buildup of stocks," he added.

Following the release of the trade figures, Premier Li Keqiang said China will not be taking any forceful stimulus measures to counter short-term fluctuations in growth, appearing to downplay expectations of aggressive action from policymakers to prop up the economy.

According to Kuijs, Beijing is walking a fine line between supporting growth and doing too much.

"They do not want to be seen as pursuing stimulus policies as they did in 2010 cause that did not go down well," he said, referring to the massive stimulus injected into the economy during the last global financial crisis which came under criticism for creating hot money flows.

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"But they are also keen to keep growth above that bottom line of 7.5 percent, so they are willing to support growth but without being seen as providing too many stimulus. So in coming months, their stance is going to be very data-dependent," he added.

Nicholas Ferres, investment director of global asset allocation at Eastspring Investments, believes it's only a matter of time before China takes more aggressive measures, which may be why markets are staying optimistic.

Last week, Beijing announced what many describe as a mini-stimulus, announcing plans to accelerate spending on railways, upgrade housing for low-income households and lower tax rates for smaller companies.

"We're back to the twisted logic that bad news is good news. I suspect that despite Premier Li's words, Beijing will be forced to ease. Easing could come in the form of a RRR cut, an interest rate cut or currency weakness," Ferres said.