A sharp fall in imports and exports in January, which included a weeklong Spring Festival holiday, has both puzzled and alarmed economists.

General Administration of Customs figures released yesterday showed exports plummeted 17.5 percent year-on-year, much sharper than the 2.8 percent fall in December.

Imports fell even more dramatically, to 43.1 percent year-on-year.

The combined foreign trade in January fell 29 percent year-on-year. Such a major decline in monthly foreign trade is rare in the 30 years of reform and opening up.

Because of the global economic downturn, foreign trade is likely to fall for several more months, the economists said. Su Chang, a macro-economic analyst with China Economic Business Monitor, said it could decline by 10 percent in the first quarter of this year.

"It is possible that China's yearly record will be negative as well." But, he said the decline in imports would be largely because of the fall in prices of industrial materials.

"Prices of primary goods - China's main imports - are at a low points now, while they were at historic highs just a year ago," he said.

Last month, however, was an exception because it had one full week of holiday from January 26. The Chinese Lunar New Year is the most important festival for Chinese but usually it falls in February.

So this year, January had five fewer working days than those in many of the previous years. If that is considered, the Customs said, exports actually rose 6.8 percent year-on-year in January. And compared with December, they increased 4.6 percent.

The worldwide deflationary cycle was another problem, the economists said. The sharp drop in imports was caused both because of a fall in global prices (most noticeably of crude oil and farm products) and a drop in demand for electronic components, which reflected the shrinking of the country's manufacturing industry.

Ting Lu, economist with Merrill Lynch in Hong Kong, said there was no good method to adjust for the Chinese New Year effects. "Our first suggestion: ignore them," Lu said in note to clients in the monthly trade figures.

When compared with neighboring economies, experts said, China's record is not the worst. Jing Ulrich, analyst with JP Morgan, has written in a report that while the recent export slowdown has been alarming, it has not been as severe in China as in some neighboring economies that rely more heavily on the hi-tech sector.

While Jing Wang, chief economist of Morgan Stanley, said China's export structure is more diverse, and as a result less volatile, in the region.

(China Daily February 12, 2009)