Sharp decline in Chinese trade surprise economists

Rob Schmitz Apr 10, 2014
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Sharp decline in Chinese trade surprise economists

Rob Schmitz Apr 10, 2014
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Speaking at the Bo’ao forum for Asia, Chinese Premier Li Keqiang reassured attendees that China’s economy “has had a smooth start this year, and our overall performance is good.”

 As Li said this, key economic data was released from China showing exports from the world’s second biggest economy had slipped 6.6% in March from a year ago. Imports were down more than 11%.

Both numbers were worse than forecasters predicted. Part of the reason is that a year ago, many Chinese exporters were overstating the value of their shipments in order to bypass China’s strict currency controls. That allowed them to bring more dollars into China with the hopes that the Yuan would appreciate. This year, China’s central bank has pushed down the value of the Yuan, so there’s no longer an incentive for exporters to fake the numbers.

The 11% decline in imports, however, surprised a lot of economists. The month of March is always an important one for China, because it’s the first month after the Chinese New Year, which tends to skew numbers a bit because of the inactivity of the markets.

A decline in imports is a sign that China’s economy is still in slowdown mode. Premier Li acknowledged as much during his speech today. “These problems are not only the result of a complex international environment, but also objective reflections of prominent conflicts that lie deep inside China’s economy, as well as the fact that China’s growth rate is shifting gear,” said Li.

 

 

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