The data for February suggested a rapid 48.3% uptick of Chinese exports, marking one of the few positive economic headlines for the nation in recent weeks. That figure beat the market’s far more timid expectation 13% export growth. On the heels of a marginal decline in January, this turn of events – while perhaps temporary – feels quite crucial for a nation that is currently confronted head-on with the specter of slowing growth.
That said, the same report also showed a substantial 20.5% decline in imports. While a growing trade surplus possibly might help top-line GDP figures in the short-run, it also puts upward pressure on the yuan which could harm future exports. Furthermore, when you see import numbers like those, the question of domestic consumption also looms large. Though consumption does not yet take a particularly substantial portion of Chinese imports, one would hope to see at least some positive momentum in that category as the nation transitions away from an investment driven economy.
WSJ article
Trade-weighted, inflation-adjusted exchange rate graph inserted by the Prof
From everything I’ve read (both online articles and blog posts) it definitely seems that domestic consumption will be the keystone to China’s economic future. The Central Government slashing interest rates and the somewhat newfound realization that China’s manipulation of GDP reporting both create avenues to facilitate the shift to consumerism. The boom of tech startups could have a meaningful impact on the service industry as well.
On the export side, to what extent is this merely a seasonal issue, due to the date of Chinese New Year? Are export data consistent with data from the other side (e.g., US imports from China)? Are imports due to the drop in commodity prices (including petroleum but also iron ore and many other items)?
Furthermore, as per my graph, has the RMB actually depreciated? After all, it’s shifted only about 3% versus the US$, while the Japanese yen has shifted 50% and the Euro by almost as much!!