China trade decline signals more stimulus is coming

Beijing - Central bank cut interest rate six times in the last year.

China's exports fell for a fourth straight month and imports matched a record stretch of declines, signalling that the mounting drag from slower global growth will push policy makers toward expanding stimulus.
Overseas shipments dropped 6.9 per cent in October in dollar terms, the customs administration said on Sunday, a bigger decline than estimated by all 31 economists in a Bloomberg survey.
Weaker demand for coal, iron and other commodities for China's declining heavy industries helped drag imports down 18.8 per cent in dollar terms, leaving a record trade surplus of $61.6 billion.
The report signals that policy makers may need to unleash more fiscal stimulus to support growth even after the People's Bank of China (PBOC) cut the main interest rate six times in the last year to a record low and devalued the currency. The government has already relaxed borrowing rules for local authorities, and the top economic planning body has stepped up project approvals.
"The October trade data keep pressure on for more domestic easing," said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong. "Measures are likely to continue to be focused on shoring up domestic demand rather than weakening the currency. And over time, the role of fiscal policy expansion should rise."
Fiscal stimulus this year includes more infrastructure spending and expanding the lending capacity for the China Development Bank and other policy banks. The PBOC has also made repeated reductions to the amount of reserves required of lenders.
Exports slump
Exports to Japan slumped nine per cent in the first 10 months from a year earlier, while those to the European Union declined 3.7 per cent. Shipments to Hong Kong dropped 11.7 per cent during the same period.
"Exports continue to face structural headwinds," said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight in Singapore. "With recent economic data continuing to indicate some moderation in Chinese economic growth during the second half of 2015, the Chinese government may utilise additional monetary and fiscal stimulus measures to boost gross domestic product growth in 2016."
Exports to the US, China's largest trading partner, jumped 5.8 per cent in the first 10 months from a year earlier, while those to the Association of Southeast Asian Nations increased 4.2 per cent. Shipments to India rose 8.9 per cent.
Output this year is on pace for the slowest expansion in a quarter century. The world's second largest economy grew 6.9 per cent in the three months through September from a year earlier, the slowest quarterly increase since the first three months of 2009. Fourth quarter growth will be at the same 6.9 per cent pace, according to economists surveyed by Bloomberg.
China's imports declined for a 12th month, matching a record losing streak from 2009. Sunday's report showed the value of imported iron ore, crude oil and coal all slumped more than 40 per cent in the first 10 months of 2015 from a year earlier, highlighting lackluster demand from Chinese factories and construction sites.
Imports from all 10 of the major trade partners listed by the customs administration declined in the first 10 months. Imports from Australia, a major source of China's iron ore during the real estate boom, plunged 25.7 per cent.
Top leaders have signalled that they won't tolerate a sharp slowdown. President Xi Jinping said last week that average annual growth should be no less than 6.5 per cent in the next five years to realise the nation's goal to double 2010 GDP and per capita income by 2020. - Bloomberg