China's exports and imports grew at their slowest pace in more than two years in December as foreign and domestic demand weakened, data showed today.
The figures raised expectations of more policy action from the country's authorities to support the world's number two economy.
Annual export growth of 13.4% in December was in line with expectations, albeit the slowest since November 2009 except for a February distortion caused by Lunar New Year holidays.
But it was a big slowdown in import growth that caught investors' attention, sinking to a 26-month low of just 11.8% year-on-year compared with the 17% forecast by economists.
Financial markets took the data in their stride, with hopes that it will prompt a relaxation of monetary policy offsetting fears over slowing growth.
Despite easing growth rates, the total value of China's imports and exports finished 2011 at an all-time high of $3.6 trillion. But the overall trade surplus shrank to a three-year low of $155 billion from 2010's $183.1 billion.
The narrowing trade surplus for the year may help China argue that it is reforming its currency policy, countering foreign critics who accuse it of holding the yuan artificially low to give its exporters an unfair competitive edge.
But the pace of slackening trade is disconcerting for Beijing as exporters are mainstay employers in China, even though their output accounted for only around 7% of China's 2010 GDP.
The softening domestic demand revealed by the data also complicates plans by China's ruling Communist Party to rebalance the economy towards more internal demand and consumer imports and tilt it further away from exports.
To counter patchy demand in the United States and Europe, China's top two export markets, Beijing cut banks' reserve requirements by 0.5 percentage points to 21% in November, the first such cut in three years.
Economists see more cuts to required reserve ratios (RRR) coming, further tweaks to fiscal policy and quite possibly intervention to slow the steady strengthening of the yuan, which gained about 4.5% against the dollar in 2011.
Economists see slowing trade and tight domestic credit conditions dragging China into its worst quarter in more than two years between October and December, with GDP growth expected to ease to an annual 8.7%, down a full percentage point from the first quarter.
Many economists believe China needs to grow its economy by about 8% at least, if it wishes to create enough jobs to sustain current employment rates.
