With Falling Exports, China Encouraging Shipping Industry Overhaul

China’s January exports fell 17.5%, the fastest pace in nearly 13 years and worse than most preliminary forecasts.

Shipments to the United States fell 9.8%. And exports to China’s largest trading partner, the European Union, fell 17.4%. China exports fell a slight 2.8% in December.

China imports also plunged 43.1% in January, nearly double December’s drop, and further stretching China’s $39.1 billion trade surplus and salting tensions between their many trading partners - most of whom are under severe economic duress.

“It’s a very eye-catching trade surplus and people will ask how it can be so high at a time that everybody else’s economy is suffering,” Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd in Hong Kong, told Bloomberg. “What’s happening here is really dramatic, underscoring plunging global demand.”

The falling demand overseas for Chinese products is pinching China’s factories and manufacturing sector. Many are bracing for a continued drop in orders, which will shrink profit margins from around 10% to between 5% and 8%, Danny Lau, Chairman of Hong Kong’s Small and Medium Enterprise Association, told Reuters.

“With banks having cut credit lines… the situation is becoming much more dangerous, even with orders, they still need the credit or cash to buy the (raw) materials,” Lau said, adding that 5% of the estimated 60,000 Hong Kong factories are “sitting on the danger line” and could fold.

Government Aid, Instruction

Just as news on its exports broke, China’s cabinet approved a plan to bolster its domestic shipbuilding industry, which on top of falling shipments has a fleet of outdated ships that often run at overcapacity, Reuters reported.

The plan will encourage production of newer ships and promote consolidation via merger and acquisitions within the industry.

The government didn’t put a price tag on the plan, nor did it say if the money would come from China’s $586 billion infrastructure stimulus plan.

Also seeking to boost domestic consumption, China will help establish more breakfast-serving chain stores in its larger cities and fast-track the establishment of a “safe-meat” service - monitoring food quality and slaughter house sanity, Bloomberg reported.

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