-- Signaling a worsening global slowdown, China said its exports fell in November for the first time in seven years. The 2.2% dip represented an abrupt reversal from the previous month, when foreign shipments grew 19%.
"Their growth is obviously slowing dramatically. … We're going to see more factory closures," says Nicholas Lardy, a China-watcher at the Peterson Institute in Washington.
That's bad news for a developing country where exports account for roughly 40% of total output. In fact, the key to China's astonishing economic growth over the past decade has been a global system that married Americans who consumed too much with Chinese factories that produced too much.
Now, Americans — suddenly cut off from easy credit — have slashed their spending. That's hammered Chinese factories, forcing them to close or lay off workers. And it's also affecting countries from Australia to South Korea that sell China parts and raw materials used to make finished goods.
Rob Nichols, president of the Financial Services Industry Forum, just returned from meetings with Chinese officials. "The message we heard was: 'We're all in this together. What impacts us impacts you, and vice versa,' " he said.
Imports also plunged in November, by 17.9%, leaving China with a record monthly trade surplus for the fourth-consecutive month. The decline reflected falling prices for oil and other commodities, as well as cooling domestic demand.
Since China uses large amounts of imported components to produce the electronics, apparel and other goods it sells in the U.S. and Europe, the import drop also suggests future export totals will be lower.
The World Bank says export growth will be "very weak" in 2009; some private forecasters predict an unprecedented outright stagnation, Lardy says. The increasingly dire outlook for the coastal factories that have provided jobs for the millions of rural migrants who move to the cities each year is sparking official concern.
"Excessive production halts and closing of enterprises will cause massive unemployment, which will lead to instability," Zhang Ping, head of the powerful National Development and Reform Commission, warned earlier this month.
China's government in November announced a $586 billion program to boost the economy. But the new trade figures mean officials will be under pressure to do more.
The central government could respond by raising salaries for government workers, increasing health and education spending on low-income households, and launching public works projects to boost hiring of unskilled workers, says Jing Ulrich, managing director of JPMorgan Chase's China equities in Hong Kong.
"China's export sector will begin to show signs of stabilization only with global recovery," Ulrich told clients in a research note.