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China January exports, imports seen falling, virus risks global trade disruptions: Poll


Date: 06-02-2020
Subject: China January exports, imports seen falling, virus risks global trade disruptions: Poll
China's exports and imports likely fell in January after a brief rebound at the end of last year, a Reuters poll showed, and a rapidly spreading virus outbreak could disrupt its global trade for months to come.

Exports from the world's second-largest economy are expected to have dropped 4.8% in January from a year earlier, according to a median estimate from the survey of 18 economists, compared with a 7.9% gain in December and marking the steepest fall since February 2019.

Imports likely fell 6% from a year earlier in January, a sharp contrast with 16.5% growth in the previous month.

The drop was likely due to seasonal distortions caused by the long Lunar New Year holidays, when business activity typically slows, analysts at Goldman Sachs said. The holiday fell in February last year.

The impact of the virus on trade will start to show in February data, the analysts said. Nearly 500 people in China have died in the outbreak so far, with over 24,000 infected.

In a bid to contain the virus, authorities have implemented widespread curbs on transportation and other tough public health measures that are already weighing heavily on the travel, tourism and retail sectors. Analysts are forecasting a sharp drop in first-quarter economic growth.

Most firms scale back operations or close for long periods around the holidays, which began on Jan. 24 this year. This year, China's government extended the holidays to limit the spread of the virus, and it is not clear when millions of migrant workers will be able to return to factory floors.

Many Chinese exporters say they're facing difficulty in fulfilling overseas orders for February as companies are unsure when they will resume production.

"So far 14 provinces and cities across China, including main industrial centres of Shanghai, Jiangsu, Guangdong and Fujian have told businesses not to reopen until at least Feb. 10...These places account for around 70% of China's GDP and 80% of its exports," analysts with Capital Economics said in a note, adding that extended factory closures would affect supply chains in the rest of Asia.

The disruptions are already rippling through global supply lines from Asia all the way to New Zealand and the United States.

Hyundai Motor said on Tuesday it will suspend production in South Korea because the outbreak has disrupted the supply of parts from China. In addition, many airlines have cancelled passenger flights to China, impacting air freight.


The manager of a state-backed logistics firm in Ningbo said that the waiting time has swelled to "at least four days" to unload river barges due to staffing shortages.

Economists from UBS have lowered their forecasts for China's annual merchandise export growth to 1.3% from 2.0% and for import growth to 3.2% from 3.6% in 2020.

The White House's top economic adviser said on Tuesday that the outbreak would delay a surge in U.S. exports to China expected from the Phase 1 trade deal set to take effect later this month.

But Larry Kudlow said it would not have a catastrophic effect on business supply chains.

With the risks of the epidemic to China's economic growth mounting, the central bank is likely to lower its key lending rate - the loan prime rate (LPR) - on Feb. 20, and cut banks' reserve requirement ratios (RRRs) in the coming weeks, Reuters reported on Tuesday citing sources.

The sources also said Chinese policymakers are debating whether to lower the planned 2020 economic growth target of around 6%, which many private sector economists see as well beyond China's reach at this point.

Source: moneycontrol.com

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