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China’s Trade Data Is Significantly Weaker Than Forecast

HONG KONG — Chinese trade data for June came in much weaker than expected on Wednesday, offering up the latest evidence that the Chinese economy has lost much of its previous vigor.

Exports fell 3.1 percent from a year earlier — the first drop since early 2012 — the customs department reported, and imports decreased 0.7 percent, falling for the second month in a row. Both figures were far below the expectations of analysts, who had projected a 4 percent rise in exports and an 8 percent climb in imports.

The weak import data underlined slack demand within China. The export slump reflected weak overseas demand, but analysts said it was also partly attributable to a recent government crackdown on false export reporting by companies that had been seeking to bypass currency controls and move money into the country as a way to place a bet on further appreciation of the currency, the renminbi. The strengthening currency and rising wages in China have helped erode the country’s competitiveness at a time when demand from export markets like the United States remains lackluster.

Growth in China has been cooling for many months as the new leadership in Beijing seeks to shift the economy away from a credit-driven and increasingly outdated growth model. For years, China has relied on heavy manufacturing, state-sponsored investment and exports to power growth. Aware of the limits of these growth drivers, China is now seeking to foster more domestic demand and raise productivity.

Policy makers have also been seeking to rein in the rapid credit growth that has built up in recent years and created new potential risks to the economy. Last month, China’s central bank engineered a cash crunch within the banking sector in a bid to get commercial lenders to adopt more prudent lending practices.

The cost of this shift is slower economic expansion, and analysts on Wednesday cautioned that this could start to impinge on China’s ability to create new jobs for the millions of fresh graduates who enter the work force each year.

China is unlikely to achieve its target for this year of 8 percent growth in trade, Liu Li-Gang, a China economist at ANZ in Hong Kong, wrote in a research note. “This will not only bring about downside risk to the G.D.P. growth for this year but also place severe pressure on employment,” Mr. Liu wrote, referring to gross domestic product.

For now, however, Beijing appears comfortable with the economy’s performance.

At a meeting in southern China on Tuesday, the prime minister, Li Keqiang, said that although major economic indicators remain within reasonable bounds, growth is facing challenges, the state-run Xinhua news agency reported.

“This year, economic activity has in general stayed stable, and the main indicators are still within reasonable bounds for the annual forecasts,” Mr. Li said. “But economic conditions have become more complex and changeable. There are both favorable and unfavorable factors, and the economy has both momentum for growth and downward pressures.”

China must maintain steady growth while also carrying out adjustments needed to ensure healthy development in the long-term, he said. “Macro adjustment must be both grounded in the present and take a long-term view, so that economic activity is within reasonable bounds, and the rate of economic growth and employment levels do not slip below the lower limit.”

Chris Buckley contributed reporting.

Article source: http://www.nytimes.com/2013/07/11/business/global/chinas-trade-data-is-significantly-weaker-than-forecast.html?partner=rss&emc=rss

Off the Charts: U.S. Recovery Fares Well in a 5-Year Comparison

But it wasn’t. The fourth quarter of 2007 was the peak for the American economy. It began a mild recession in early 2008 that turned into a severe one by late in the year, when the credit crisis spread to most of the world. A few countries escaped recession, but virtually no one was able to avoid severe bear markets in stocks.

The accompanying charts look at changes in gross domestic product and stock markets around the world since the end of 2007.

In some countries, including the largest developing economies in Asia, the G.D.P. charts show no indication that bad things ever happened. China’s G.D.P. growth slowed a bit, and may be slowing more now, but it never came close to recession.

By the third quarter of 2012 China’s gross domestic product, measured in local currency and adjusted for inflation, was 50 percent larger than it had been at the end of 2007. The economies of India and Indonesia had each grown by 30 percent.

At the other end of the spectrum, some major economies are smaller now than they were then, with little indication that they will completely recover any time soon. The Italian and Spanish economies, hurt by their inability to compete with Germany in export markets, continue to decline. Spain’s economy is smaller than it was in 2005, while Italy’s has fallen below 2003 levels.

Both would be doing better if they were able to devalue their currencies against Germany’s, but they cannot because they share the euro.

Not being in the euro has been critical to the success of some European countries. Poland’s economy has grown by about 15 percent, measured in local currency, as the value of the zloty fell sharply in late 2008 and has yet to fully recover against the euro. That has made its exports more competitive.

While some developing economies have showed good growth over the last five years, their stock markets have not done well. In early 2008, China’s market broke sharply lower, leading to fears that a world recession might begin there. Nothing like that happened, but the stock market has yet to fully recover.

The United States has perhaps the best combined record of major developed economies. Its G.D.P. is 2.5 percent larger than it was at the end of 2007 — a smaller gain than was shown in Australia, Canada or Germany — but its stock market is closer to recovering all the lost ground than the markets in any of those countries.

MSCI, a research company that compiles stock indexes based on all major stocks in each country, reports that its All Country World Index is now 16 percent lower than it was five years ago. World G.D.P. — counting all 56 countries for which data through the third quarter of 2012 is available — has fully recovered, largely because of strength in large emerging economies. Both those figures are calculated in dollars, but individual country charts are based on performance measured in local currencies.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2012/12/29/business/us-recovery-fares-well-in-a-5-year-comparison.html?partner=rss&emc=rss

China’s Trade Data Is Significantly Weaker Than Forecast

Off the Charts: U.S. Recovery Fares Well in a 5-Year Comparison

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