China saw exports rise 30.5% year on year in April to $119.9billion, and imports up 49.7% to $118.24billion, leaving a trade surplus this month of $1.68billion compared to a deficit last month of -$7.24billion. Consensus estimates were for a deficit of -$0.55billion.
The rise in imports, though much of it driven by increasing commodity prices, is a positive sign for global trade and economic activity as China increasingly becomes a driver of world economic growth.
One issue of contention may lie in the results around the squeezing of the Chinese trade surplus, and the obvious implications this may have for the, seemingly much yearned for, Yuan policy adjustment.
The chart below shows the pretty stark decline in the trade surplus over the past year. However how long this trend will continue is up for debate as the rolling 12-month surplus showed signs of stabilizing in April coming in at about $170billion, vs $174billion in March (down from the all time high of $360billion in January 2009).
However, the main downside risks to the trade balance of weak domestic demand and rising commodity prices, could well be persistent - particularly on the demand side as the troubles in Europe threaten to shake up market sentiment and consumer confidence (note, the EU makes up for about 20% of China's exports).
But again, an important takeaway from the results is the surprising resilience that trade volumes have shown since plummeting in early 2009. To be sure, volumes are below trend, but are tracking around pre-crisis levels. But as far as the yuan goes, no matter what angle you take on the trade issue, the European crisis (trillion dollar backstops notwithstanding) could well take away any compulsion that the Chinese may have felt to alter yuan policy.
The data due in the next couple of days though will add to the mix, So watch this space! As a reminder, the data due out this week includes: (consensus vs previous): Consumer Price Index (2.7% vs 2.4%), Fixed Asset Investment (26.1% vs 26.4%), Industrial Production (18.5% vs 18.1%), and Retail Sales (18.2% vs 18%).
Econ Grapher Analytics www.econgrapher.com
China Customs www.customs.gov.cn
Article Source: http://www.econgrapher.com/10may-chinatrade.html
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