China’s exports plunge, investment surges amid mixed cues

China's exports fell 22.6 per cent in April from a year ago, the sixth consecutive month of decline, the Chinese government said today, even as a rise in bank lending lifted spending on factories and other fixed assets, in a bid to boost the economy.

With the decline to $91.9 billion, the fall in April overtakes 17 per cent drop registered in March and points to a trade sector still continuing to suffer a demand slump brought about by the global downturn.

But there are some positive signs even in the backdrop of the depressed export performance. Even as exports of heavy machinery and other industrial goods continue to decline, exports of clothing shoes, plastics and other labour intensive consumer goods suggest a revival in demand according to economists.

Analysts say retailers in US have resumed ordering to restock low inventories in the expectation of stability returning to consumer spending.

However, operating conditions for Chinese exporters will not improve significantly for some time they say. At a recent spring-trade show in southern China's Guangdong orders fell 17 per cent compared to the autumn show.

Import demand also remains weak falling 23 per cent to $78.8 billion according the Customs Administration which put China's trade surplus for April at $13.1 billion compared with an $18.6 billion surplus in March.

China's investments in factories and property development, however, jumped 30.5 per cent from a year earlier in the first four months of the year. The growth stemmed from the government's stimulus projects under which it pumped $543.2 billion in the form of bank loans.

According to the National Statistics Bureau, the growth rate was 1.9 percentage points higher than in January-March.

The January-April period saw China's banks issue about $757 billion in new loans this year, in response to government policies for financing of infrastructure projects to boost employment and stimulate demand.

But a with a two-thirds drop in new lending in April as compared with March to $86.6 billion trends suggest that spending may wind down in coming months as the huge inflows are absorbed in the economy.

Investment in the private sector remained comparatively weak with mounting concern over risks of bad debt and waste from excess investment in factory capacity and other projects.

However, with the protracted weakness in overseas demand for Chinese exports, the spending is felt to be necessary for a recovery.

Analysts say that although much of the new bank lending is yet to yield results in the form of faster economic growth, fixed investment is set to accelerate in the coming months. This would result in increasing orders and revival of industrial production.