In April exports dropped by 22.6%. But in the first 4 months of 2009 the banks give out more loans than in the previous 21 months. Economists warn against the risk of overproduction provoking a drop in consumer prices with subsequent problems for companies in loan repayments.

Beijing (AsiaNews/Agencies) – Mainland exports plunged 22.6 % in April from a year ago, the sixth straight monthly decline. Meanwhile the slew of government backed bank loans contine, at a slower pace, in efforts to breathe new life into the factories and production industries.  Economists are questioning whether the companies will be able to repay these loans, if exports and internal demand do not increase.

In April exports of heavy machinery and other industrial equipment continued to fall, but recent increases from the previous month in exports of clothing, shoes, plastics and other labour-intensive consumer goods suggest some recovery in demand. Industrialists are optimistic as American retailers have begun ordering to restock low inventories, amid signs that consumer spending may be stabilising. But everyone maintains that an immediate recovery is not imminent.

As a result imports dropped by 23%.  However in April the trading balance remained positive, with a surplus for China or 13.1 billion dollars, down from 18.6 in March.

Analysts consider the fact that the mainland's investments in factories and property development jumped to 30.5 % from a year earlier in the first four months of the year to 3.71 trillion Yuan, thanks to a slew of bank loans for government stimulus projects. Between January and April 5.200 billion Yuan was paid out in bank loans (circa 558.4 billion euro, counting for the total amount loaned in the previous 21 months and equal to 20% of gross national product), also favoured by government aid packages for investments in new infrastructure projects.  Many hope that this will have a knock on affect, increasing internal consumer demand.

But others note that in April new loans granted totalled 591.8 billion Yuan, not even a third of Marches 1.891 billion, and hypothesize that these investments are above all a direct result of government financing which are destined to run out within a few months.  They also add that in the private sector investments have remained modest and in April the consumer price index dropped 1.5% compared to April 2008. Even if production costs also dropped by 6.6%, many maintain that this is a result of factory overproduction and meagre internal demand; which gives rise to fears that the large investments in factories are not capable of obtaining an increase in internal consumer demand and that many companies will have difficulty in meeting loan repayments.

 

• china
• economy
• deflation
• conumer
• prices
• exports
• trading
• drop
• finance
• crisis