BEIJING, Feb. 13 (Xinhuanet) – China’s imports and exports fell in January from a year earlier as week-long holiday skewed the data amid weak global demand and a slowing domestic economy.

Experts said the import and export data were in conformity with the expectation and forecasted a grim export outlook in 2012, which makes further policy adjustment a necessity.

Trade slumps on holiday, weaker demand

China's exports dropped 0.5 percent year-on-year to 149.94 billion U.S. dollars in January, the first decline in more than two years, the General Administration of Customs (GAC) said in a statement Friday.

Imports plunged 15.3 percent year-on-year to 122.66 billion U.S. dollars in January, while foreign trade fell 7.8 percent year-on-year to 272.6 billion U.S. dollars, it said.

Authorities said the January data had been distorted by the earlier-than-usual Chinese Lunar New Year holiday, during which many of China's factories and businesses cut back production or close their doors.

The figures were affected by an earlier Chinese Lunar New Year holiday, which fell in January and cut four workdays off the month compared with January of 2011, the GAC said.

After seasonal adjustments, exports rose 10.3 percent year-on-year in January, it said.

At the same time, analysts said the latest trade figures added to mounting evidence that the world's second-largest economy was slowing as the eurozone crisis and weakness in the United States hurt demand for Chinese products.

Import growth has weakened as China tightened lending curbs to cool an overheated economy and export industries bought less imported raw materials and components as foreign orders weakened.

China's slower growth and year-on-year decreases of global commodity prices resulted in the import slowdown, said Zhang Yansheng, director of the Institute for International Economics Research under the National Development and Reform Commission, China's top economic planner.

The double-digit fall in imports also reflected "extremely weak domestic demand as investment slumps", said Alistair Thornton, a Beijing-based analyst at IHS Global Insight.

China's export growth has declined steadily as Europe's debt problems and high U.S. unemployment hurt demand for goods.

"Lackluster foreign demand will pose severe challenges for China's exports in the first half of this year," said Zhao Jinping, deputy head of the foreign economic research department under the Development Research Center of the State Council.

Meanwhile, the government is under pressure to rein in inflation and property prices, hence unlikely to unleash massive stimulus to cushion companies from external shocks, Zhao said.

"China will face severe import and export situation in the year 2012," Zhang Yansheng commented.

Zhang predicted that more disputes and spats over trade and exchange rate and more commodity price fluctuations may occur this year as many countries, including U.S. and France entered the election year and foreign politicians may resort to trade protectionism and geopolitical conflicts to garner voters' attention ahead of elections.

Falling external demand and property market curbs dragged down China's economic growth to 8.9 percent in the fourth quarter of 2011 from 9.7 percent in the first quarter.

The debt crisis in Europe remains a troubling uncertainty. Earlier in the week, the International Monetary Fund warned that growth in China could be cut in half if Europe were to suffer a major recession.

Bank of America-Merrill Lynch economist Lu Ting said the European sovereign debt crisis posed the biggest threat to the Chinese economy this year and would be a "major drag" on growth as consumers cut back on spending.

China to maintain basically stable foreign trade policies

Since late last year, Chinese exporters have been complaining about the worsening business environment both at home and abroad, represented by shrinking global demand, especially in the developed markets, a rising yuan, and higher labor costs.

China's Minister of Commerce Chen Deming said Thursday China will keep the overall stability of export and import policies, including export rebates.

"Export in January this year cannot make us optimistic... Chinese trading companies, particularly small and micro businesses, have come under growing pressure," he said in a statement released by the Ministry in an interview with Bloomberg.

Chen vowed to ease tax burdens on trading companies, give them more financial support and energetically expand imports to balance foreign trade.

Chen added that a stable yuan currency is needed to help Chinese exporters.

The yuan advanced to an 18-year high on Friday, standing at 6.2937 against the greenback.

Chinese Premier Wen Jiabao said last week that China will try to maintain basically stable foreign trade policies, adding that any adjustments should be more "encouraging than restrictive".

Import to rebound, or may outpace export growth

As for the salient fallback of import growth in January, analysts said the single month’s data can not explain the long-term trend. Compare with the first half year of 2011, the commodity prices like iron ore, crude oil plunged by 20 percent in January, thus triggering the fall of import amounts.

Zhao Jinping pointed out that imports will accelerate and may outpace exports in the next few months as China's domestic demand is more robust than foreign demand and china’s economy is growing faster than the global economy. Zhao added that the stable and moderating domestic demand will exert downward pressure on China’s imports. Therefore, import is unlikely to see a large rebound.

Lu Zhiming, researcher from Communication Bank, forecasted a massive rebound in imports and exports in February as seasonal factor faded out, the PMI index rose to 50.5 percent, indicating a moderate economic growth, and good recovery momentum of U.S. economy, which is favorable to boosting China’s exports.

Chinese economist Fan Gang, director of the National Economic Research Institute at the China Reform Foundation, noted that European and U.S. economy will not enter recession but remain in depression for a long term. With the falling expectation for RMB appreciation, China’s export condition will not be too bad with 10 percent growth projected.

In January, China's foreign trade rose 6.2 percent year-on-year after seasonal adjustments, GAC data shows.

Trade with the European Union, the country's top trade partner, dipped 7.1 percent year-on-year to 42.68 billion U.S. dollars in January.

Trade with the United States, the country's No. 2 trade partner, shrank 3.9 percent year-on-year to 35.46 billion U.S. dollars.

China's trade with emerging economies bucked the downward trend in January, with its trade with Russia and Brazil rising by 26.8 percent and 5.7 percent year-on-year respectively.

Foreign trade to have structural change, trade surplus to decrease

Zhang Yansheng pointed out that in the coming five years, the structure of our foreign trade, in terms of import and export markets, products and trend, is undergoing a period of fierce transformation, through outbound investment and capital export.

On one hand, China’s traditional trade markets will witness contraction of different level while the trade volume of emerging markets and non-traditional markets are on the rise. On the other hand, due to the rising labor cost, the export of labor-intensive products, such as textile and footwear, will descend by a large margin. However, the exports of machinery and equipment manufacturing products will continue to grow.

Zhang further explained that as the U.S. envisaged invigorating manufacturing industry, expanding exports, encouraging American enterprises to withdraw to the homeland so as to solve the problem of "hollow of U.S. industry", "we may face the possible trend of European and U.S. enterprises leaving China. Therefore, the condition that processing trade accounts for half of the total export volume, will witness considerable structural changes, thus trade surplus will drop constantly."

Weak imports fueled a surge in trade surplus, which reached 27.28 billion U.S. dollars in January, up from 16.52 billion U.S. dollars in December 2011 and 6.46 billion U.S. dollars in January 2011.