China: Trade Numbers Crash

Econintersect:  Chinese imports and exports fell sharply and unexpectedly in April, dashing hopes for a spring rebound to the country’s relatively moribund foreign trade activities.  The year-over-year decline for exports was 6.4%, much weaker than the 2.4% increase expected, but better than the 15% decline in March.  Imports dropped by 16% from April 2014, worse than the expected 12% decline, and a bigger collapse than the large 12.7% decline in March.  The balance of trade remained positive with a surplus of $34 billion, bigger than the number for March ($31 billion).

The following graphics from Trading Economics and annotated by Econintersect show the consistency of decline for Chinese trading activity so far in 2015.  Exports have declined year-over-year for three of the first four months of this year, while imports have declined all four months.  The decline in exports can be considered to reflect softening of the global economy, while lower imports indicate a softening of the Chinese domestic economy.  Of course, for a country with a large positive trade balance such as China, weaker imports are in part a consequence of fewer exports.

Bloomberg had the following comment:

Stronger demand from a recovering U.S. economy is being offset by sluggishness in Europe and a slide in shipments to Japan, compounding challenges for a nation facing rising labor costs and a strong currency.

Many analysts expect China to continue recent monetary easing actions.  CNBC quoted Paul Mackel, head of Asia FX Research of HSBC:

“I think you’ll still see some couple policy rate cuts here, maybe 25-50 basis points, in the next few months or couple of quarters.”

And also from CNBC, Li Wei, , the China and Asia economist for Commonwealth Bank of Australia in Sydney:

“Exports, once regarded as a stabilizer for growth this year, are now becoming a downside risk.  The government has to do more to help growth.”

John Lounsbury

Sources:

• China exports, imports fall sharply in April (Li Anne Wong, CNBC, 08 May 2015)

• China Exports (Trading Economics, 08 May 2015)

• China Imports (Trading Economics, 08 May 2015)

• China’s Competitiveness Slides, Biting Into Exports (Bloomberg, 08 May 2015)