- Carolyn Wilkins, Bank of Canada Senior Deputy Governor
China's exports and imports dropped sharply in April, underscoring concerns over the economic health of the world's second biggest economy. Exports plunged 6.4% last month from the year-ago period, coming against economists' expectations for a 2.4% rise, and following a 15% slump in March. Imports plummeted 16.2% on year, also missing the anticipated 12% decline, and after diving 12.7% in March. This resulted in the trade surplus for the month of $34.13 billion, compared with the expected $39.45 billion and March's print of $30.8 billion. Last week, China's trade minister said the devaluation of currencies by some countries led to sharp gains in the Yuan, undermining the competitiveness of Chinese exports. The Yuan has strengthened against major non-dollar currencies in recent months, leading to its rise on a trade-weight basis.
The dismal trade performance fuels the risk that second-quarter gross domestic product may drop below 7% for the first time since the depths of the global financial crisis, adding to fears of job losses and growing levels of bad debt. The People's Bank of China has lowered interest rates and banks' reserve requirement ratio three times since November in an attempt to revive the economy, and most analysts expected the central bank to ease policy again in coming months.
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