China warns of slowing demand from emerging markets

Reuters

BEIJING, Oct 17 (Reuters) - China's exporters face a

difficult time in coming months as demand from emerging markets

slows, the Chinese trade ministry warned on Thursday after the

latest trade data showed sales to Southeast Asia slowed sharply

in September.

But China is ready to take measures to support its exporters

to ensure the trade sector grows 8 percent this year as

targeted, Commerce Ministry Spokesman Shen Danyang said,

allowing exporters to see "mild growth" in the next few months.

"Although developed countries showed signs of recovery in

recent months, some emerging economies are starting to lose

growth momentum," Shen told a press briefing.

"Many risks, such as capital outflows, currency depreciation

and rising inflation pressures also exacerbate the economic

slowdown in emerging countries," he said.

The comments follow disappointing trade figures for

September released at the weekend, which showed China's exports

falling 0.3 percent, in stark contrast to market expectations

for a 6 percent rise.

Sales to Southeast Asia were especially weak, with growth in

September falling to a 17-month low of 10 percent from 31

percent the previous month.

Analysts say fears of possible U.S. monetary policy

tightening has hurt demand for Chinese goods as investors

withdrew their money from emerging Asian economies -- China's

fastest-growing export market for the past year.

Yet China has been an anomaly among emerging nations as

investors retreat from riskier markets. Not only has China not

seen an exodus of capital, it is instead fighting rising

inflows.

China's central bank warned this week that rising capital

inflows are fuelling the rate of credit expansion in the world's

No. 2 economy, and that authorities would fine-tune policy to

keep liquidity at appropriate levels.

That capital is still flowing steadily into China was

underscored by data on Thursday that showed foreign direct

investment (FDI) in September rising 4.9 percent from a year ago

to $8.8 billion, holding within a steady range seen this year.

That took the total amount of FDI that China drew in the first

nine months to $88.6 billion.

In a reflection of the global slowdown in the export sector,

investors are shifting in favour of the services industry, the

Commerce Ministry said.

FDI in the service sector rose 13.3 percent between January

and September to $44.7 billion from the same period a year ago,

accounting for 50.5 percent of total FDI.

In contrast, manufacturing investment dropped 4 percent over

the same period to $35.5 billion, taking up only 40 percent of

total FDI flows.

Asian investors were responsible for the bulk of the FDI,

with the top Asian 10 nations accounting for 86 percent of total

FDI in the first nine months, far outstripping U.S. firms, which

accounted for 3.3 percent.

European firms were responsible for 6.7 percent of Chinese

FDI.

In the first nine months, China's outbound direct investment

by non-financial firms rose 17.4 percent from the same period of

a year ago to $61.6 billion, the ministry said.

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