SILVER LINING:Imports declined only slightly and much less than expected, a sign of improving domestic demand and that the economy might be slowly stabilizing.
China’s central bank yesterday slashed its forecast for exports, predicting a second straight annual fall in shipments, but said the economy would still grow 6.8 percent this year.
The People’s Bank of China (PBOC) also warned in its midyear work report that the government’s push to reduce debt levels and overcapacity could increase bond default risks and make it more difficult for companies to raise funds.
Ahead of a meeting of the US Federal Reserve’s policymaking board next week, it said the pace of US interest rate rises would affect global capital flows and emerging market currencies, but it did not mention the yuan.
“Since the beginning of this year, the global and domestic economic environment has experienced a number of changes,” the PBOC said in the report.
“Reflecting these recent developments, we revised our China macroeconomic forecasts for 2016. Compared with our published forecasts in December last year, we maintain our baseline projection of 2016 real GDP growth at 6.8 percent,” it said.
The report was released shortly after monthly data showed China’s exports fell an annual 4.1 percent last month, more than expected and the 10th decline over the past 12 months.
However, imports were more encouraging, declining only marginally and much less than expected, pointing to improving domestic demand and adding to views that the economy might be slowly stabilizing.
Preliminary commodity trade data showed sharp rises in imports of copper and iron ores.
“We don’t expect the trade figure will change the PBOC’s attitude towards the [yuan] exchange rate. They still prefer stability,” ANZ economists wrote in a research note.
The yuan has fallen this week after disappointing US jobs data saw markets pare back expectations of a US rate rise.
Despite cutting its forecast for exports to minus-1 percent from growth of 3.1 percent, the PBOC saw a domestic recovery remaining on track.
It upgraded its forecast for fixed-asset investment growth to 11 percent, an increase of 0.2 percentage points from estimates it made late last year.
A government spending spree on major infrastructure projects and a continuing recovery in the housing market have boosted demand for materials from cement to steel.
China’s trade shrank 8 percent last year, compared with the government’s goal for 6 percent growth, in the worst performance since the global financial crisis.
The PBOC also said it expected consumer price inflation to pick up to 2.4 percent this year, 0.7 percentage points higher than its earlier forecast and signaling that worrying deflationary pressures seen last year were easing.
Indicators from the consumer, investment and factory sectors have suggested the prolonged slowdown in the world’s second-largest economy might be bottoming out, and many analysts no longer expect much in the way of aggressive policy easing going forward, given concerns about rising levels of bad debt. |
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