China's exports slow as catastrophe hits Asia

China's exports slow as catastrophe hits Asia

SHANGHAI (Reuters): The Asian financial crisis started to take its toll on China's foreign trade as exports slowed in January, economists said yesterday.

But they said the latest figures were unlikely to change Beijing's determination to avoid a currency devaluation to make exports more competitive.

"There has been a slowing of exports," said Yang Shijun, a researcher in economics at Fudan University. "But it has not been worse than expected."

China's exports in January reached $12.68 billion, up 8.8 percent from a year ago, but growth was well below the 20.9 percent rise for all of 1997.

Beijing has repeatedly pledged not to devalue its currency, the yuan, to speed exports, though analysts concede there has already been pressure from foreign trade companies for help in boosting competitiveness.

Chinese officials are concerned that a devaluation of the yuan would overload fragile Asian currencies, and perhaps trigger a new round of currency weakness across the region.

Beijing also fears a devaluation would jar the Hong Kong dollar's peg to the U.S. dollar, a move that could prove politically embarrassing. The former British colony returned to Chinese rule on July 1 last year.

Late on Friday, China's official media announced that exports to Asia were down 1.4 percent in January.

"There isn't much point to a devaluation," said Sheng Hong, an economist at the Chinese Academy of Social Sciences in Beijing.

He said a devaluation would likely be insufficient to offset the greatly reduced purchasing power of importers in Asian countries where currencies have tumbled.

At the same time, it would be unnecessary for most other markets where China's exports remained on a healthy track.

Exports to North America in January were up 14.3 percent, while those to Europe rose 33.7 percent, Africa 42.9 percent and Latin America 43.6 percent.

"This is actually a little better than expected," he said. Economists said that it was still too early to make broad judgments on the trade front for the year.

But they noted January's export growth topped December's pace and left China with a solid surplus of US$3.99 billion for the first month of the year after a $40 billion surplus for all of 1997.

The January surplus, however, reflected a 12.9 percent slide in imports during the month to $8.69 billion, and that pointed to other concerns.

"The fall in imports is a problem," said Sheng. "We should be seeing growth in both imports and exports."

The import slump is yet another sign of the domestic economy's lack of vigor. Last week, China's state media announced a 1.5 percent decline in the retail price index for January, the fourth consecutive month of negative inflation.