China Trade Slowdown Shows Xi Must Fuel Consumption
China’s exports rose less than forecast in November, underscoring the need to accelerate a shift toward domestic demand as the nation confronts a jobless rate newly estimated at almost double the official figure.
Overseas shipments increased 2.9 percent from a year earlier and imports were unchanged, the customs administration said today in Beijing, contrasting with industrial production and retail sales figures yesterday that exceeded estimates. Urban unemployment exceeded 8 percent this year, a central bank-backed research center said yesterday in Beijing.
The Communist Party’s new leadership, headed by Xi Jinping, needs to reduce China’s reliance on exports and investment spending to sustain expansion in the world’s second-biggest economy. Xi, who last week retraced a 1992 tour by Deng Xiaoping that spurred economic opening, faces a wealth gap that is now 50 percent higher than a risk level for social unrest, according to a household survey by the research center.
“The extremely weak exports performance laid bare the fragility of the recovery, which is mainly driven by infrastructure investment,” said Ren Xianfang, a Beijing-based analyst with IHS Global Insight. “Xi’s leadership team should accelerate reform to unleash and boost domestic demand to make growth more sustainable and less susceptible to external headwinds.”
The MSCI Asia Pacific Index pared gains of as much as 0.3 percent and was little changed as of 4:50 p.m. in Tokyo. China’s benchmark stock gauge, the Shanghai Composite Index (SHCOMP), rose 1.1 percent to a four-week high as investors focused on yesterday’s stronger output data.
Industrial output climbed 10.1 percent in November from a year earlier and retail sales growth accelerated to 14.9 percent, while inflation was 2 percent, the statistics bureau said yesterday.
Separately today, Chinese monthly passenger-vehicle sales rose 8.75 percent last month to the highest in almost two years, data from the China Association of Automobile Manufacturers showed.
In Japan, government data indicated today that the nation has entered a technical recession, defined as two consecutive quarters of contraction. Third-quarter gross domestic product shrank at an annual pace of 3.5 percent, a final reading showed. The government revised down the second-quarter figure to show a 0.1 percent contraction.
In China, Xi visited the province of Guangdong over the weekend in his first public trip since taking over as head of the party last month, drawing parallels to a 1992 southern tour by paramount leader Deng. The official Xinhua News Agency today cited Xi as saying yesterday in Guangzhou that the nation shouldn’t delay pushing for economic restructuring.
Export growth compared with the 9 percent median estimate of 31 analysts in a Bloomberg News survey and 11.6 percent expansion in October. Imports (CNFRIMPY) were forecast to have risen 2 percent, easing from a 2.4 percent pace the previous month.
China’s exports to the U.S., the largest destination behind Hong Kong last month, declined 2.6 percent in November from a year earlier, the first drop since February 2011, customs data showed. Shipments to South Korea registered the first fall since April, while sales to the European Union dropped 18 percent, the sixth straight slide.
The U.S. decline may have resulted in part from an eight-day strike at California ports that ended Dec. 4, Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said in a note today. The strike at the ports of Los Angeles and Long Beach, the largest U.S. port complex, affected about $1 billion of trade a day.
Imports of iron ore by volume increased 8.2 percent in the first 11 months from a year earlier, slowing from an 8.9 percent pace in the January-October period, government data showed.
The People’s Bank of China will also this week release money supply and lending figures for last month. New local-currency loans probably fell to 550 billion yuan ($88 billion) from 562.2 billion yuan a year earlier, according to the median forecast in a Bloomberg survey, while M2, the broadest measure of money supply, may have risen 14.1 percent, unchanged from October’s pace.
The urban jobless rate in July was 8.1 percent, based on a survey of 8,438 households by the Survey and Research Center for China Household Finance, a body set up by the central bank’s Institute of Financial Research and Southwestern University of Finance and Economics in Chengdu, southwest Sichuan province. Unemployment among migrant rural workers had almost doubled to 6 percent in July from 3.4 percent a year earlier, the report showed.
That compares with a U.S. unemployment rate that was 7.7 percent last month, government data showed last week, down from 8.3 percent in July. The figures are based on a survey of about 60,000 households conducted by the U.S. Census Bureau for the U.S. Bureau of Labor Statistics.
China’s urban registered jobless rate, the only official measure of nationwide unemployment, was 4.1 percent at the end of September, unchanged from the previous eight quarters, according to data from the labor ministry in Beijing.
Industrial-production growth compared with the 9.8 percent median estimate of analysts in a Bloomberg survey, while the rise in retail sales exceeded the 14.6 percent median estimate.
China’s fixed-asset investment excluding rural households in the first 11 months of the year rose 20.7 percent, the same pace as in the January-October period.
Consumer inflation compared with 1.7 percent in October and marked the 10th straight month below the government’s 2012 target of 4 percent. Producer prices fell 2.2 percent, the ninth straight drop, while the pace of the decline moderated for a second month.
“Chinese authorities will continue to guard against the inflation risk in 2013,” and the central bank will have to pay more attention to managing price expectations, Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. (ANZ) in Hong Kong, said in a note yesterday.
Caterpillar Inc., the world’s biggest construction and mining equipment maker, is seeing signs of recovery in China and expects economic growth to increase next year as the government focuses on rural migration to towns and cities, Chairman and Chief Executive Officer Doug Oberhelman said in an interview with Bloomberg Television on Dec. 6.
The Gini coefficient, an index measuring income inequality, was 0.61 in China in 2010, the center’s survey showed. The guideline ranges from 0, which represents perfect equality, to 1, which implies perfect inequality. Readings above 0.4 are used by analysts as a gauge of the potential for social disturbances.
The ruling Communist Party has pledged to narrow the gap between rich and poor and address corruption that’s fueling discontent in the world’s second-biggest economy. Reducing inequality is one of the main challenges facing China, the World Bank said in a February report that outlined policies to help the nation make the transition to a high-income country.
“China must change the structure of income distribution and rely on massive fiscal transfers to narrow such a yawning disparity,” Gan Li, director of the center and a professor at Texas A&M University in College Station, Texas, said at a briefing yesterday.
Elsewhere, German exports unexpectedly rose in October as shipments to countries outside Europe offset weaker demand in the euro area. Final GDP numbers due today in Italy may confirm that that nation’s economy shrank 0.2 percent in the third quarter from the previous three months as the country’s recession entered its second year.
--Zheng Lifei and Zhou Xin. With assistance from Nerys Avery in Beijing and Ailing Tan in Singapore. Editors: Scott Lanman, Paul Panckhurst
To contact the editor responsible for this story: Paul Panckhurst at email@example.com