The Commerce Ministry has poured cold water over some of the optimism that China’s economy has reached the end of its slowdown. Ministry spokesman Shen Danyang said September’s surge in exports and the return of import growth wasn’t enough in itself to confirm a recovery. As one who, as regular readers will know, cautions about extrapolating anything from one month’s economic data, this Bystander has some sympathy with the ministry’s caution. One does wonder what the somewhat more upbeat prime minister Wen Jiabao would make of such remarks, though.
Beijing has been doing its bit to boost exports such as accelerated payments of export tax rebates and making bank loans and services cheaper for exporters. There is a limit to how much support it can give without being repeatedly hauled before the World Trade Organization, an activity that is seemingly becoming a national sport not just in the U.S. but now Mexico as well. Nor is there much Beijing can do in the short-term about reinvigorating demand in the country’s export markets in Europe and the U.S. The official target of 10% export growth for the year looks likely to be missed, especially if the ministry is already dampening down expectations.
The one point to be made about China’s latest trade figures is that demand from developed economies has not collapsed, regardless of the fact that last year’s trade surplus, at $155 billion, was down from 2010’s $183 billion and the smallest since 2005. Year-on-year export growth in December was 13.4%, and even 7.2% from debt-struck Europe. Slowing growth rates, to be sure–November’s export growth was 13.8% y-o-y–but not contracting ones.
December’s increase in the monthly surplus from $14.5 billion to $16.5 billion was largely due to slower import growth, at 11.8% y-o-y, a 26-month low. Commodity imports were resilient. It was domestic consumers who kept their wallets shut, another reason for the recent priming of the credit pumps. The trade figures also provide inconclusive support to visiting U.S. Treasury Secretary arguments that Beijing needs to let its currency appreciate further against the dollar.
Filed under Economy, Trade
China ran a trade deficit in the first quarter, its first quarterly deficit in seven years. One quarter does not a rebalanced economy make, but it does indicate movement in that direction. The question is how solid is that progress.
Reasons to be cautious: The quarterly surplus was tiny. Imports, at $400 billion, barely exceeded exports at $399 billon, and high commodity prices tipped the balance; adjust for the change in the prices of oil and iron ore alone and the deficit would have become a surplus of $18 billion. The quarter also ended with a surge in exports, up 36% in March to $152 billion, not far short of December’s record $154 billion, and moving the monthly trade account into surplus. A tsunami-related decline in imports from Japan would have a effect on the margins, too.
Reason to be a bit cheerful: for two years imports have been growing at a faster rate exports, but not sufficiently so for the full year to turn in a trade deficit this year, we suspect. So currency and trade frictions with the U.S. and Europe will continue in 2011.
The strength of domestic demand, as evidenced by the growth in imports, does suggest, however, that China’s economy is growing robustly enough for the central bank to continue mopping up excess liquidity through raises in interest rates and the capital reserve requirements imposed on banks.
China’s trade deficit for February is an anomaly caused by the New Year holiday. This set of trade figures is even more meaningless for interpretation of a trend than a single month’s numbers usually are. If one looks at the trade figures for January and February combined, exports were up 21.3% and imports 36% on the same period a year earlier, compared with 17.9% and 25.6% in December. Rising commodity prices are inflating the export number, but the arc of the trend is for a gradually diminishing surplus on a rising volume of trade.
Filed under Economy, Trade
March’s trade figures provide the latest crocus report. While exports were down 17.1% from a year earlier, that was a less than expected decline and markedly better than the previous month’s 25.7% year-on-year decline. All of which suggests we may be getting near the nadir of the contraction in world trade. Imports are still falling faster (25.1% in March vs 24.1% in February) so we aren’t quite there yet.