China’s imports shrink as slump worsens – by Joe McDonald (The Associated Press/Toronto Star – September 11, 2012)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

BEIJING, CHINA—China’s imports shrank unexpectedly in August in a sign its economic slump is worsening and the Chinese president warned growth could slow further, prompting expectations of possible new stimulus spending.

Imports declined 2.6 per cent from a year earlier, below analysts’ expectations of growth in low single digits, data showed Monday. That came on top of August’s decline in factory output to a three-year low and other signs growth is still decelerating despite repeated stimulus efforts.

The weakness in China’s demand for imports is bad news for exporters in Southeast Asia, Australia, Brazil and elsewhere that are counting on its appetite for oil, iron ore, industrial components and other goods to offset anemic Western markets.

Analysts expect Chinese growth that fell to a three-year low of 7.6 per cent in the latest quarter to rebound late this year or in early 2013. But they say it likely will be too weak to drive a global recovery without improvement in the United States, which is struggling with a sluggish recovery, and debt-crippled Europe.

In a speech Sunday, President Hu Jintao cited slack exports and unbalanced domestic growth as challenges for a Chinese recovery.

“Pressure for economic growth to slow is obvious,” Hu said at the Asia Pacific Economic Co-operation meeting in Vladivostok, Russia, according to a text released by the Chinese government.

Hu gave no growth forecast or details of possible new stimulus but promised to continue a “proactive fiscal policy,” or government spending to pump up the economy.

Beijing has cut interest rates twice since early June and is pumping money into the economy through higher spending on building subways and other public works. Still, activity has weakened steadily, spurring some analysts to cut growth forecasts and push back the timing of a possible recovery.

“The comments made by President Hu yesterday made it clear that there will be more funding support for infrastructure investments,” said Goldman Sachs economists Yu Song and Yin Zhang in a report.

The slowdown hit at a politically sensitive time for the ruling Communist Party, which is trying to enforce calm as it prepares to hand power to Hu’s successor and other younger leaders in a once-a-decade transition.

The slump in global demand has forced thousands of Chinese exporters out of business, raising the threat of job losses and possible unrest.

August exports rose, but by only 2.7 per cent over a year ago, down from the double-digit growth of recent years as Europe’s debt woes and a sluggish U.S. recovery hurt demand for Chinese goods.

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