Sunday, November 8, 2015

Economy: Are The Chinese Trade Numbers Really So Bad?

(Drivebycuriosity) - This morning we got the newest Chinese international trade numbers (yes, they report Sundays): In October exports fell 3.6% compared to a year ago, imports dropped 16% (bloomberg.). "China trade disappoints, clouding economic outlook", comments Reuters (reuters).

Are the Chinese trade numbers really so bad? I don´t think so.

1. Falling imports are the result of the sharp drop of the commodity prices. China doesn´t have much oil and other materials, so the country has to import most of the commodities it uses. The price of oil dropped about 50% from a year earlier, other commodities got much cheaper as well. So, the sharp drop of the commodity prices reduced the expenditures for imported goods and lessened the reported import numbers significantly. The reported drop of the imports is just the result of cheaper commodities (inputs for the Chinese economy), which is good for China because it reduces the costs for companies and leaves more money in the wallets of the consumers.

Even the export numbers are influenced by lower commodity prices. For instance China imports iron ore and coal in order to produce steel for the export markets. Much lower prices for iron & coal (inputs) lead to lower prices for steel (outputs). Lower prices for imported aluminium reduce the prices for exported goods made from this metal (like computer chassis).

2 The numbers are also a result of the current Chinese transformation process. The country changes from an economy which is focused on exports and on manufacturing into a modern system that depends largely on services like the US. Last week we learned that China`s service sector grew faster, a sign that the domestic economiy is getting stronger (marketwatch).  I think that the recent numbers show that China´s economy is right on track.

Btw. the fact that exports fell less than the imports lead to a higher trade surplus - exports are exceeding imports with a greater degree. So China earned more income from international trade which is boosting the Chinese GNP.

No comments:

Post a Comment