Winter Imports From China Decline

Winter Imports From China Decline

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NEW YORK—Despite an increase in Chinese exports in the first half of the year, experts are predicting a weak Christmas season for imports to major US department stores.

"The year got off to a strong start, but it looks like we may be entering a period of stagnation that indicates a full order cycle will not be filled," said Derek Scissors, a research fellow at the Heritage Foundation with an expertise in Chinese economics. "Often this means that bigger orders made back in April will be canceled or cut down. We're expecting weak orders around the world."

Earlier in the year many companies reported that they were taking on extra workers and ramping up manufacturing in hopes of a Christmas surge. The second half of the year, however, has seen a decline in orders.

Statistics from Huangpu Customs in Guangdong province indicated that orders in July (usually a peak month for Christmas orders) were $120 million, a 10 percent decline from last year.

"Given the subdued global outlook for the consumer and in particular for domestic demand in the US, we would expect to see a decline in manufacturing imports," said Lupin Rahman, senior vice-president in the emerging market portfolio management team at PIMCO, an international investment and asset management firm.

Yifan Hu, chief economist for Citic Securities, said that discussions with local Chinese export firms have confirmed that orders are down, and that August orders were weak in comparison with previous non-recession years.

"The Christmas season this year could be better than last year, but will remain weak," she said. "We expect next year to be better, as consumption will gradually gain steam with declining unemployment, stabilizing financial housing markets and a possible push for tax cuts for the middle class. We expect a moderate recovery of consumption."

Despite reports that the US economy may be recovering, experts speculate that the drop in imports may indicate a continued slowdown, or perhaps may even bolster the "double dip" theory recently rejected by International Monetary Fund officials. The drop in imports has not been widely reported, but may be a reflection of how the major retail players are predicting the economic recovery to unfold.

The Chinese economy appears to be stabilizing, but with a decrease in external demand,exports could continue to drop, experts say. On the other hand, if the Chinese economy continues its upward trajectory, that would indicate a burst in demand from other powerhouses like Brazil or India and a potentially important shift.

"It's not necessarily the case that you can say that since Chinese orders are slowing that there will be a double dip," Rahman said. "The decline in Chinese orders might be offset by an increase in demand from other emerging markets like Mexico, which is becoming much more competitive as a manufacturer."

Chinese economists predicted last month that China's trade surplus will fall in the second half of this year (as it did last year), but Scissors believes that the numbers are as of yet inconclusive.

"In a typical year, we would be saying that the trade surplus will go up, but the Chinese themselves are predicting a decrease," Scissors said. "From the data we have, it appears that the strengthening of the US economy was more of a blip, and we will be facing a weak end-of-the-year showing for Christmas imports."

An unnamed representative of a Chinese shoe exporter said that major US stores are expecting US consumers to continue to be frugal this year.

They are expecting a slight increase to "2008 levels", he said.