In May, the Chinese external trade balance was back to large surplus at USD 35.9bn. The rise in exports (+7% year on year) may be a good indication on world trade momentum. But the question on immediate outlook is not on exports but on imports. Chinese imports continue to shrink. This reflects a weak internal demand and a very limited impulse from China to the rest of the world, notably emerging and commodity producers’ countries.
To see the specificity of the current period, I’ve looked at imports and exports 3 month change from 20114 to 2014.
The first chart is referring to intra-annual profiles for exports from 2004 to 2014. We see that all years’ profiles from 2004 to 2014 are comparable. We just notice 2008 and 2009 which have very specific profile due to the global trade collapse (see her for details http://bit.ly/WorldTradeCollapse )
2014 is on the bottom range of the comparison. The momentum remains low but the profile is not too different with a recovery during spring.
The second chart is referring to imports. Again, profiles are comparable with the exception of 2008 and 2009. But we could also say: with the exception of 2014 also. Its profile is well below previous years and there is no rebound in spring. This reflects a low internal demand dynamics. This can be seen with other data : investment dynamics is reduced this year as is the momentum of the industrial production index.
The question: is this weakness the consequence of the new Chinese growth model centered on internal but with a re-allocation of resources in the short run? Or is it the consequences of a debt-constrained economy?
If it is due to a new allocation of resources we expect that the current weakness will probably be mild and temporary. If it is due to too much debt, this can imply a break in the outlook and a negative shock on the world economy. The IMF thinks that the debt issue is not as risky as mentioned above (see here http://bit.ly/Dette-Chine )
In the short-run, the lower momentum in Chinese imports is a drag to world trade and to world GDP growth. That’s not good news.