Were China’s March trade figures really a shocker?

No one likes a Monday “shocker” – especially when it comes to Chinese trade figures.

China reported that its export sales contracted 15% in March. The double-digit plunge, at first glance, stirs the same stomach-churning feeling one gets on the first drop on a roller coaster.

But is it really a shocker? A plunge had been expected in some quarters due to the timing of this year’s late Chinese New Year. The extended holiday shut some business through early March. When such seasonal factors are factored in, China’s General Administration of Customs says March exports were only down 4.4% year-on-year, while overall exports for the first quarter actually rose by 4.9%.

Still, no one denies downward pressure on China economy is increasing. The median estimate of analysts surveyed by Bloomberg News was for an 8.2% export decline. And European analysts had expected a 12% increase. So, we’re talking about experts being 27 percentage points off base and in the wrong direction.

Imports also fell, sliding 12.7%, giving investors and policymakers already worried about the Chinese economic engine sputtering to a stop a severe case of “be careful what you ask for. ”

One of the biggest culprits is the rising yuan, which has hurt demand for Chinese goods and services abroad. But since a rising currency should help imports this is a bad sign about the state of domestic demand.

But there’s a silver lining. Bloomberg quoted Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist, as saying Monday that imports of goods consumed in China had actually improved. It quoted Louis Kuijs, Royal Bank of Scotland Group Plc’s chief Greater China economist, saying Monday, “It suggests domestic demand momentum may be improving, on the back of tentative signs recent policy easing is having an impact on the economy,” Kuijs said.

At the same time, Kuijs says there’s no way to dress up bad March Chinese trades figures. He told the Globe and Mail “It’s a very bad number that was much worse than expectations. It leads to warning flags both on global demand and China’s competitiveness.”

Chinese premier Li Keqiang also voiced growth worries Saturday in a statement on the government website. Li said China’s economy faced increased downward pressure, as the country prepares to announce first-quarter economic growth. He added that the government must “stand up to the downward pressure” to avoid an impact on employment and incomes.

Given such concern by Chinese officialdom, analysts predict we could soon see a weaker yuan, lowered interest rates and more government stimulus. Such speculation gave Chinese stocks a needed boost.

On Wednesday, China will release its gross domestic product data. The Bloomberg survey of economists has a median estimate of 7% growth in the first quarter, which would be the slowest pace since the first quarter of 2009.



Categories: Asia Unhedged

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