BEIJING – China's exports fell for the first time in seven years in November while imports plunged, showing that the nation is being buffeted by weakness in both external and domestic demand that worsened severely in just the last few weeks.
China's customs agency said Wednesday that November's exports dropped 2.2% from a year earlier to $114.99 billion. That marks the first decline in the dollar value of exports since June 2001, and a sharp reversal from the 19.2% gain recorded in October. The export performance was far worse than economists had forecast, although Chinese officials had indicated Tuesday that a decline could be in the offing.
Imports suffered an even more dramatic reversal in November, falling 17.9% from last year to $74.99 billion, after having risen 15.6% in October, in the first decline since February 2002. The import drop is a worrying signal of the health of domestic demand in one of the few major economies that is still expanding. China is the third-largest export market for the U.S., and also a major purchaser of commodities.
The November decline in imports was so much greater than that in exports that China's trade surplus soared to a fresh monthly record, of $40.09 billion.
"The whole world including China is experiencing the biggest demand shock in many years," Ting Lu, an economist for Merrill Lynch, wrote in a research note. The financial crisis likely amplified the trade impact of declining demand in the U.S. and other major nations. "A majority of that shock could be due to the collapse of [the] global financial system which provides liquidity and credit to international trade."
The rapid decline in imports also suggests that export orders for coming months are also very weak, since a large portion of China's imports are parts and components that go into exported goods.
"As demand for China's exports wane, China's call on the Asian supply chain also wanes," said Glenn Maguire, Asia economist for Société Générale. Regional suppliers such as Taiwan and South Korea have already reported sharp falls in their exports to China.
Chen Yubin, a manager at the China operations of Catcher Technology Co., a Taiwanese maker of parts for consumer electronics, said his business dropped sharply in the first days of December. The company, which has three factories in Suzhou, north of Shanghai, now expects sales this year to be flat or down slightly after years of double-digit growth. Next year could be even worse.
"Manufacturers all have very bad forecasts," Mr. Chen said. "Everybody is suddenly going into austerity mode."
China's weakening demand is also taking a toll on big commodities producers. Its imports of iron ore fell 7.9% in November, while crude oil imports were down 1.8%.
China's government is already engaged in an all-out effort to stimulate the economy, having slashed interest rates and announced a four trillion yuan ($584 billion) investment package. On Wednesday, top leaders were also wrapping up an annual economic-policy conference, though new measures were immediately announced.
The stimulus can't directly aid exporters, who depend on demand in foreign countries, and it will inevitably take more for the new money to show up in the real economy. Still, China's ability to support such massive expenditures sets it apart from neighboring countries whose stimulus efforts are more constrained.
"Imports for domestic consumption will increase very substantially as a result of the stimulus package," said Vikram Nehru, the World Bank's chief economist for Asia, at a briefing Wednesday. "For many other countries the fiscal packages will not be enough."
