China recovery gathers pace as export slump eases

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March 04, 2010

China recovery gathers pace as export slump eases

The slump in China's exports eased in November as global demand improved while strong gains in industrial output and retail sales showed that the recovery in the world's third-bigest economy is gathering momentum.

China's exports fell 1.2 percent from a year earlier last month, their smallest decline since exports began falling in November of last year, customs figures showed Friday. Imports rose 26.7 percent, helping narrow the trade surplus to $19.9 billion in November, from $24 billion in October.

"The decline in exports narrowed greatly in November because external demand is improving," said Sheng Laiyun, spokesman of the National Statistics Bureau, who briefed reporters in Beijing .

China's economy expanded 8.9 percent from a year earlier in the third quarter of this year, after seeing growth dip to 6.1 percent in the first quarter due largely to plunging demand for exports.

In another sign of relatively strong demand, the consumer price index climbed 0.6 percent over a year earlier last month as prices for food, energy, property and many commodities rose, the National Statistics Bureau reported.

Earlier this week, the government moved to support the recovery by extending tax cuts and subsidies for purchases of small vehicles and appliances, while adjusting some measures to counter rising property prices.

Boosted by massive investment and reviving demand for exports, industrial output rose 19.2 percent in November, the statistics bureau said. That compared with a 16.1 percent climb in October.

"Industrial output is still increasing and fundamentals are strengthening," said bureau spokesman Sheng Laiyun.

The unusually strong figure also reflects the relatively low base from last year, when production slowed as factories hit by the export slump closed by the thousands, he said.

Growth was strongest in heavy industries such as coal, steel, power generation and autos, the bureau said.

The report said that investments in factories and other construction rose 32.1 percent in the first 11 months of the year, to total 16.86 trillion yuan ($2.47 trillion).

Retail sales, which are playing an increasingly important role in driving growth, climbed 15.8 percent in November from a year earlier, to 1.13 trillion yuan ($166 billion).

The 0.6 percent rise in the consumer price index, the key inflation benchmark, was slightly above the 0.5 percent increase earlier forecast. Consumer prices had been falling, on an annual basis, since February.

Still, the rise is considered moderate, and reflected a seasonal jump in food prices, which are heavily weighted in the index.

"Currently, there is still no pressure from inflation," Sheng said.

While promising not to withdraw support for stimulus, China's economic planners, who held an annual strategy meeting earlier this week, said they will adjust policies to ensure more balanced growth.

In one of those adjustments, a tax cut on sales of cars with engines of 1.6 liters or smaller was extended until the end of next year, but the tax was raised to 7.5 percent from the current 5 percent. The tax was halved earlier this year to counter a slump in sales late last year.

In a move aimed at countering speculation in real estate that has drawn complaints that housing prices are becoming unaffordable for many families, the government reintroduced a 5.5 percent business tax on sales of homes bought less than five years earlier.

The tax had been suspended last year as property sales slumped as the economy slowed due to plunging exports.

Source: China Daily

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China recovery gathers pace as export slump eases