Dim Picture of China's Trade
By
Alex Frangos
April 10, 2014 6:22 a.m. ET
Slice and dice China's trade data and investors can see what they want. What's undeniable is that China's role as export powerhouse isn't what it used to be.
On the surface, China's trade data for March were terrible. Exports dropped 6.6% year on year and imports fell a more disconcerting 11% <http://online.wsj.com/news/articles/SB10001424052702303873604579492364231819656>. China seems not to be selling much to the rest of the world, nor does it seem to be juicing its economy at home in a way that requires new inputs from abroad. It was the first month this year without distortions from the Lunar New Year, so these were meant to be the real numbers.
Yet caveats abound. Last year's figures were goosed by companies lying on invoicing documents in order to sneak cash into the country on the back of goods orders. That led last year to a huge spike in trade between mainland China and Hong Kong. But Beijing cracked down on the practice, and so far this year exports to Hong Kong are down 31%, signaling less funny business.
Exclude Hong Kong, and China's exports to the rest of the world are up 4% this year. On the import side, the March plunge came despite healthy increases in imports of iron ore, copper, car parts and agriculture products, all indicators of a domestic economy that isn't lying down just yet. Trade in products frequently used to mask illicit capital flows---precious metals and high-tech goods---dropped substantially.
Combined with other indicators such as container traffic and the export component of recent purchasing managers surveys, and trade seems not to be China's biggest worry.
If China's trade data isn't to be fully trusted, another view comes by looking at import data from its largest export destination, the U.S. Imports of Chinese goods to the U.S. looks dreary, down 1% through February after rising only 3.5% all last year. While China remains America's major supplier of all manner of items, the marginal change in imports is coming from others, especially Vietnam. Imports from Vietnam to the U.S. grew 22% last year, and 19% so far this year.
Vietnam is tiny compared with China, whose economies of scale and supply chains mean it won't be replaced as the world's factory floor anytime soon. But in finding growth for a weary economy, China will have to look from within.
*Write to * Alex Frangos at alex.frangos@wsj.com <mailto:alex.frangos@wsj.com>
Copyright 2013 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement <http://online.wsj.com/public/page/subscriber_agreement.html> and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
www.djreprints.com <http://www.djreprints.com/>
By
Alex Frangos
April 10, 2014 6:22 a.m. ET
Slice and dice China's trade data and investors can see what they want. What's undeniable is that China's role as export powerhouse isn't what it used to be.
On the surface, China's trade data for March were terrible. Exports dropped 6.6% year on year and imports fell a more disconcerting 11% <http://online.wsj.com/news/articles/SB10001424052702303873604579492364231819656>. China seems not to be selling much to the rest of the world, nor does it seem to be juicing its economy at home in a way that requires new inputs from abroad. It was the first month this year without distortions from the Lunar New Year, so these were meant to be the real numbers.
Yet caveats abound. Last year's figures were goosed by companies lying on invoicing documents in order to sneak cash into the country on the back of goods orders. That led last year to a huge spike in trade between mainland China and Hong Kong. But Beijing cracked down on the practice, and so far this year exports to Hong Kong are down 31%, signaling less funny business.
Exclude Hong Kong, and China's exports to the rest of the world are up 4% this year. On the import side, the March plunge came despite healthy increases in imports of iron ore, copper, car parts and agriculture products, all indicators of a domestic economy that isn't lying down just yet. Trade in products frequently used to mask illicit capital flows---precious metals and high-tech goods---dropped substantially.
Combined with other indicators such as container traffic and the export component of recent purchasing managers surveys, and trade seems not to be China's biggest worry.
If China's trade data isn't to be fully trusted, another view comes by looking at import data from its largest export destination, the U.S. Imports of Chinese goods to the U.S. looks dreary, down 1% through February after rising only 3.5% all last year. While China remains America's major supplier of all manner of items, the marginal change in imports is coming from others, especially Vietnam. Imports from Vietnam to the U.S. grew 22% last year, and 19% so far this year.
Vietnam is tiny compared with China, whose economies of scale and supply chains mean it won't be replaced as the world's factory floor anytime soon. But in finding growth for a weary economy, China will have to look from within.
*Write to * Alex Frangos at alex.frangos@wsj.com <mailto:alex.frangos@wsj.com>
Copyright 2013 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement <http://online.wsj.com/public/page/subscriber_agreement.html> and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
www.djreprints.com <http://www.djreprints.com/>
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