China's monthly exports drop first time in 7 years

By Wang Xu (China Daily)
Updated: 2008-12-11 06:52

Exports and foreign direct investment (FDI) both fell in November because of shrinking demand overseas, sending fresh signs of economic weakness and prompting calls for more measures to bolster the economy.

Exports dropped 2.2 percent to $114.99 billion last month, the first monthly decline in seven years, Customs authorities said Wednesday. And FDI fell 36.52 percent year-on-year to $5.3 billion, the Ministry of Commerce said.

But the country's trade surplus soared to a record $40.09 billion in November despite a fall in exports because imports fell, too, by 17.9 percent year-on-year after having risen 15.6 percent in October.

Wholesale inflation eased to a 31-month low, thanks to a fall in commodity prices because of rising inventory and weak demand. And the producer price index (PPI) rose 2 percent year-on-year, the lowest since April 2006.

A vendor arranges footwear at her stall in a market in Nanjing, Jiangsu province December 10, 2008. The central government is trying to boost domestic demand as China's trade surplus soared to a record $40.09 billion in November despite a fall in exports because imports recorded a big fall, too. [Agencies]

The consumer price index (CPI), to be released today, is expected to fall, too. In October the CPI, the main gauge of inflation, moderated to an 18-month low of 4 percent year-on-year. It had peaked to 8.7 percent in February.

Inflation weakened largely because of the recent drop in commodity prices, including those of crude oil and non-ferrous metals.

Analysts said weak business sentiment has pushed up inventories of raw materials across the country, which in turn depressed factory gate prices.

The wholesale inflation is likely to fall further in the coming months because the slump in global oil and commodity prices haven't been fully taken into account in the latest data.

Business and consumer demand is expected to weaken further in the short term, because it will take a few months for the government's $586-billion stimulus package to take effect.

The analysts said the exports and imports figures show domestic companies are wary of importing raw materials and investing afresh because of the economic downturn.

"China's exports and imports growth collapsed in November showing that demand is simply disappearing," said Wang Tao, an economist with UBS Securities. "We expect more negative growth in exports in the coming months, given the deteriorating global economic outlook."

Jing Ulrich, JP Morgan chairman for China Equities, said: "It has become all the more important for the government to take steps to rebalance the drivers of growth."

"And with few options left to revive exports, the government is understandably focusing on boosting domestic demand and pushing forward infrastructure initiatives to absorb some of the migrant workforce."