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10 Mar 2019, Guy Dunn

Trade data: a cause for concern

The February trade data for China that emerged at the end of last week was a lot worse than expected. While the timing of the Chinese New Year was undoubtedly a factor, a year-on-year drop of 20% in February was the steepest decline in three years. Taken together, January and February declined by 4.6% compared to the same period last year. The concerns that accompany such weak data will not be eased by news of a likely delay in talks between US and Chinese leaders aimed at reaching an agreement to halt the damaging trade war.

China is not alone in reporting troublesome trade data with Korea and Japan exports also seeing significant declines in recent months – much of this caused by a slowdown in Chinese imports from these countries.

Against this backdrop, the National People’s Congress has been in session in Beijing. Premier Li Keqiang’s address was notably downbeat with projections of economic growth cut and warnings of “tough challenges” ahead. The Congress’ announcements of large tax cuts for small and medium Chinese businesses and significant infrastructure investment clearly denote an administration that sees the need for fiscal intervention if China is able to meet even reduced growth targets. Original source: EMIS