October 13, 2011 4:56 am

China’s trade growth slows

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China trade

China’s trade growth slumped last month as the world’s second-largest economy felt the impact of economic turmoil in its most important trading partners in Europe and the US.

Exports increased by their slowest pace in seven months in September, expanding 17 per cent from a year earlier to just under $170bn, compared with a nearly 25 per cent increase in August, according to customs data released on Thursday.

“China’s export growth is feeling the chill from the intensifying crisis and weakening demand from the west,” Qu Hongbin, an economist at HSBC, said.

Imports rose 21 per cent from a year earlier to $155bn, slower than a 30.2 per cent rise in August.

China is the world’s largest goods exporter and its trade fluctuations often provide clues to the health of the global economy.

Trade with crisis-hit Europe, China’s single biggest partner, showed the most obvious slowdown last month, with exports to the region growing by just 9.8 per cent from a year earlier, compared with 22 per cent growth in August.

Some analysts said Chinese officials could use the monthly contraction to fend off attacks from US politicians, who have introduced legislation to pressure Beijing to raise the value of its tightly managed currency. But the argument is unlikely to convince members of the US Congress since the overall trade surplus for the third quarter hit $64bn, compared with $47bn in the second quarter of this year.

On Tuesday, the US Senate approved a bill that that could impose tariffs on imports from countries that deliberately keep their currencies undervalued, a charge that is frequently levelled at China. The legislation is unlikely to pass through the US House of Representatives but it has provoked a strong response from China.

Beijing describes it as trade protectionism, condemning the bill as a serious violation of World Trade Organisation rules and a “ticking time-bomb” that could ignite a trade war.

Thursday’s customs data also showed that trade slowed between China and the US in September. Its trade surplus, a serious point of contention with big trade partners, particularly the US, came in lower than expected at $14.5bn in September, compared with $17.8bn in August and $31.5bn in July.

On a monthly basis, the volume of exports to Europe in dollar terms also fell by 7.6 per cent in September from a month earlier, a potentially worrying sign as Chinese export volumes usually pick up in the months leading up to the Christmas shopping season.

China’s economy is slowing thanks to government attempts to rein in credit and cool a construction boom. Most economists expect China is on track for a “soft landing” and annual gross domestic product growth for the third quarter is expected to come in above 9 per cent when it is released next week.

“While China’s trade sector is expected to slow down further in the coming months, concerns of a hard landing in China are still unwarranted,” HSBC’s Mr Qu said.

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