The good news out recently regarding the Chinese economy is that exports are surging – the follow-through that manufacturing is in rude health has spurred currencies and stock markets of supplying nations – but are surging exports really such a good sign for China?
Bloomberg reported that overseas shipments increased 21.8 percent from a year earlier, quoting customs administration data, in a month that had four fewer working days than last year. The number compares with the rise of 8.1 percent median estimated in an earlier Bloomberg News survey.
Exports to the European Union rose 16.5 percent, marking the third straight advance for the first time since 2011. Shipments to the US increased 15.7 percent, although sales to Japan dropped 6.5 percent. With the Chinese Lunar New Year holidays falling in January some years and February others, it makes more sense to combine the two months to iron out month-on-month distortions.
Even so, combined exports for January and February still increased 23.6 percent from a year earlier, underlining, many believe, the strength of the global recovery.
But at the same time, imports have fallen by a surprising 15.2 percent, while imports for the first two months combined rose only 5 percent from a year earlier, compared with a 7.9 percent increase last year. As a result, China made a trade surplus in February of $15.25 billion following a $29.15 billion surplus in January.
South Korea, China’s largest supplier, took a large part of the hit with February sales falling 12.9 percent from the month before. Nor was this a fudge on working days: adjusting for holidays and weekends, exports rose 20.6 percent in February on an annualized daily basis following on from 25 percent in January.
So much for re-directing the Chinese economy towards internal consumption and away from a reliance on exports.
Not What Beijing’s Hoping For
Slowing imports and rapidly rising exports, admittedly only two months of data, still suggest an economy addicted to exports for growth. Meanwhile, PMI numbers, often a better measure of what’s to come rather than what has been, showed falls towards 50 across four indexes.
Bloomberg’s median of estimates is for growth of 8.2 percent in the first quarter, but the PMI numbers suggest that may be the peak for now. Over-reliance on exports, even in a global economy that many are hoping is gradually improving, is not what Beijing is hoping for.
Beijing may have to do more to boost domestic demand; with rising exports, they have the latitude to do that by allowing the yuan to appreciate, stimulating imports and consumption while dampening exports.
Many in the West would hope that will happen, but little action is likely to happen before Xi Jinping, the newly appointed head of the Party, will formally take over as president at the end of the current NPC session on March 17 – if then.