Chinese exports in February fell much steeper than analysts had expected. The drop of 25.7 percent compared with a year ago continues the trend of falling export rates of the last four months, but is significantly steeper than the previous declines. Imports also fell sharply by 24.1 percent in February. China’s trade surplus shrank sharply from a record high of $39.1 billion to $4.84 billion. At the same time, fixed asset investment in roads, railways and power grids increased significantly, sparking hopes that the economic stimulus package shows first positive effects. The struggling export sector will increase the domestic pressure on China’s government to weaken the yuan, while partner countries demand an appreciation of China’s currency.
Ahead of the release of official industry statistics for February initial signs point to only weak growth. With the exception of a few sectors in areas such as oil exploration and non-metal mining, most industries are expected to report lower growth rates for February. China’s heavy industry sector has been particularly hit by the slowdown, with its overcapacity posing major problems for policymakers.
A government official emphasized that China’s economic stimulus plan will not put economic growth over the environment. The Environment Ministry so far has rejected projects worth RMB 104 billion due to environmental considerations. The government is particularly concerned about risks to the country’s drinking water sources, energy consumption, and natural reserves.