China September imports plunge in new sign of weakness

That topped forecasts for a surplus of USD47.90 billion following the USD60.24 billion surplus in August.

China is widely expected to post its slowest economic growth in a quarter of a century this year amid weak demand, factory overcapacity, high debt levels and cooling investment, but there are doubts over whether Beijing can do much about it.

The government has cut interest rate five times since November and pumped money into the economy through spending on public works construction. Economic growth held steady in the quarter ending in July at 7 percent.

Julian Evans-Pritchard of Capital Economics warned that annual export readings may be distorted downward by base effects from the strong export performance at the end of 2014, which many suspected was due to yuan speculation disguised as trade.

“This suggests that domestic demand may have softened”, though the decline partly reflects lower prices for imports, he said. Oil import prices made the sharpest declines, Customs said, even as crude purchases went up 8.8 percent.

Import volumes are a leading indicator for exports in China, given a large share of materials and parts re-exported as finished goods.

Communist leaders want to reduce reliance on exports, but their plans call for trade to hold steady to protect millions of manufacturing jobs.

China’s September imports fell by an unexpectedly wide margin of 20.4 per cent from a year ago in a new sign of weakness in the world’s second-largest economy.

Investor sentiment will also likely continue to hinge on the Federal Reserve’s policy path. Traders are now pricing in a 37 percent chance of a rate liftoff by December, down from odds as high as 75 percent before China’s surprise currency devaluation in August, while there’s a 59 percent probability of an increase by March, according to data compiled by Bloomberg. But a sharper fall in imports left economists divided on whether the country’s ailing trade sector is on the mend.

“We expect imports and exports situation in the fourth quarter will improve from the third quarter if no major contingent economic or political incidents happen”, Huang said.