China’s exports decreased by 0.3% according to the Chinese General Administration Of Customs. This coupled with an increase [in imports?] of 7.4% points to several trends occurring in China. The economic recession has
eaffected demand for Chinese goods internationally. This could eaffect GDP growth for China. If exports drop, production within the country itself could slow, thus decreasing GDP even more. Currently the Chinese Government is looking to increase economic growth by 7.5% for the year. International groups downgraded their estimates for China’s economic growth and cautioned that in the event of a United States default, emerging markets would take a severe hit.
Housing and infrastructure investment predominately have led to Chinese economy recovery. Contrasting with China, European and American exports have increased a bit and this could partially explain some decrease in Chinese exports but not all of it.
The inflation increase that China is experiencing could help with the export problem. When the Chinese yuan is valued less, exports increase because a dollar can buy more Chinese goods.
One Response to China Export Decline and Import Increase
In macro, we have the “multiplier” concept – ceteris paribus the impact of a drop in net trade is amplified. But has Chinese growth been driven by trade the past few years?? How could we define / test that?
Inflation drives up prices inside China, and unless the exchange rate depreciates, the impact is to make exports less competitive [and imports more attractive]. What has happened to the value of the yuan?