China’s Exports Fall Most In 13 Years

China’s exports fell by the most in almost 13 years as demand dried up in the U.S. and Europe, worsening the outlook for jobs and industrial production in the world’s third-biggest economy.

Shipments declined 17.5 percent in January from a year earlier. That was more than the 2.8 percent decline in December.

China’s economic slide has already cost the jobs of 20 million migrant workers, adding pressure on the government to boost consumption and expand a 4 trillion yuan ($585 billion) stimulus package. Government researchers have advocated weakening the yuan against the dollar to support exports, a move that could add to trade tensions amid the worst financial crisis since World War II.

“All China’s major trading partners are in recession,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd. in Hong Kong. “Boosting domestic demand is extremely important.”

Imports declined 43.1 percent in January from a year earlier, on the nation’s waning demand for raw materials for manufacturing and lower commodity prices, leaving a trade surplus of $39.11 billion. Imports fell 21.3 percent in December.

Central bank Governor Zhou Xiaochuan said yesterday that the nation needed to cut its savings rate to boost consumption and sustain growth. Wrong as it sounds, economy gets bogged down if the savings rate keeps going up, which leads to local industries dying down.

China’s expansion may slump to 3 percent this quarter from a year earlier, the worst performance in at least 15 years. The government may expand a program of subsidies for home-appliance purchases, keep cutting interest rates and bank reserve requirements and let the yuan fall to 7 against the dollar this year.

China’s economy grew 6.8 percent from a year earlier in the fourth quarter, the slowest pace in seven years, after gaining 9 percent in the previous three months.

I expect CAF (Morgan Stanley China A Share Fund) to be under pressure in the coming days.

Similarly expect EWH (iShares MSCI Hong Kong Index Fund) to be under pressure. 50 dma has provided a resistance/support line and should be used to trade accordingly.