China Import Pace Slows For Second Month

Growth in Chinese imports has slowed for a second consecutive month, adding to signs the nation's appetite for raw materials might not be as extensive as once thought. Imports of goods in Sept. were up 21.3% in dollar terms from a year earlier, China's customs agency said recently. That compared to a 23.1% gain in August and 33.7% in July. For the months at the beginning of 2008, year-on-year import growth averaged nearly 30%. And the pace of imports is slowing, growth in export shipments remained largely stable. Customs figures showed a 21.5% year-on-year gain in Sept. vs 21.1% in August. That surprised many analysts who had predicted a sharp impact on China from the global economic slowdown. The surge in commodity prices early this year added substantively to its import bill, so the recent decline in global commodity prices is likely responsible for some of the slowdown. But the numbers also seems to reflect cooling of China's domestic economy. Steel production, for example, has slowed sharply and the level of new construction has dropped. Just as China's boom drove some of the rise in raw-material costs, reassessments of likely Chinese demand in a potential global recession have also contributed to the recent fall in world prices. While China's overall economic growth is generally expected to slow only to near 9% this year, compared to more than 10% in recent years, that could still mean significantly reduced demand for commodities. Those price declines and the weakness in China's imports have had another consequence: the renewed expansion of the nation's already-huge trade surplus. The surplus shrank for the first two quarters of this year, but grew again in the quarter ending Sept. 30, rising 12% to $82 billion. In fact, the surplus for Sept. alone, $29.3B, was a record high for a single month. And with the economic outlook for China's big markets of the U.S., Europe and Japan all worsening, analysts uniformly expect exports to slow more sharply in coming months. That, in turn, could feed into further weakening of import demand, as much of China's imports are parts and raw materials used to manufacture goods for export. Energy demand, at least, doesn't seem to be collapsing. Partial figures released by Customs suggest China imported about 15M tons of crude oil in Sept., that would be in line with recent growth trend. Industry analysts believe Chinese refiners last month may well have taken advantage of lower crude oil prices that fell about 13% in Sept. from August, to refill their depleted inventories. That likely reflects how the slowdown in China's domestic economy now seems to be concentrated in the real estate sector. That drives demand for metals: copper for appliances and electrical wire, steel for construction. That likely reflects how the slowdown in China's domestic economy now seems to be concentrated in the real estate sector. That drives demand for metals: copper for appliances and electrical wire, steel for construction. Estimates by Standard Chartered of China's copper demand show it slowing to an average of 3.5% growth this year, compared with 37% in 2007. The China Iron & Steel Association says domestic steel demand in August shrank 6% from a year earlier; media reports say the association is coordinating reductions in output.