-Li-Gang Liu and Hao Zhou, ANZ economists
China, the world's second biggest economy, saw its trade performance significantly deteriorating in January, underscoring deepening weakness in the nation's economy. China posted a 3.3% drop in exports from a year-ago levels in January, suggesting that weak demand from abroad as well as at home undermined factories' output. Exports have not been in the red territory since March 2014. Imports, meanwhile, plummeted 19.9% compared to a year ago, the biggest drop in more than five years and against economists' prediction for a 3.0% decline. As a result, China's trade surplus widened in January to $60 billion from $49.6 billion in December, and beat a forecast of a $48.4 billion surplus.
The poor trade performance will stoke concerns that a slowdown in China, which was originally considered a desirable adjustment away from an investment-driven export model toward one based on domestic consumption, is at risk of derailing. Beijing is predicted to lower its economic growth goal to around 7% this year, after expanding at the 7.4% pace in 2014, the slowest in 24 years. On top of that, given the recent property market slump coupled with declining activity in the manufacturing sector, the Chinese government is expected to intervene and step up economy stimulating measures.
© Dukascopy Bank SA