*****Imports to China fall 21.3 percent in December*****

The Wall Street Journal reports that China's imports and exports tumble in December.

(emphasis mine)

JANUARY 10, 2009, 8:05 A.M. ET
China Imports, Exports Tumble

SHANGHAI --
China's exports and imports both fell for the second consecutive month in December, with an accelerated contraction in trade offering a bleak outlook for the world's third-largest economy and highlighting the need for Beijing to rely more on potent fiscal stimuli.

The weak trade data, especially that of imports, showed
China isn't just suffering from a global economic slowdown but also from a deterioration in local demand, an engine that the authorities have hoped would keep the economy going and unemployment in check.

China's exports in December fell 2.8% from a year earlier to $111.16 billion, while imports in the month fell 21.3% to $72.18 billion, a person familiar with the data said.

China's trade surplus in December totaled $38.98 billion, the person said. That was down from a record $40.09 billion in November.

The fall in December exports was lower than the median forecast of a 3.8% drop by 12 economists surveyed by Dow Jones Newswires but was higher than the 2.2% decline in November, the first monthly drop since June 2001.

The rate of decline for imports in December was sharper than the 19.1% expected by the economists and the 17.9% fall in November, the first decline since February 2005.

While the falling value of imports in December partly reflects declining international commodity prices, it also indicates "a sharp deceleration of economic growth in the fourth quarter and poor growth momentum in the first quarter," said Stephen Green, an economist at Standard Chartered Bank.

Machinery imports were weak in November and likely continued into December, showing that "there is a real downturn in domestic investment...and manufacturing," he added.

Beijing's recently unveiled four-trillion-yuan fiscal stimulus package, which will raise public spending on infrastructure and social welfare, will likely give some support to imports of commodities such as iron ore and metals this year, Mr. Green said.

The weak trend for imports could start stabilizing in the second half of this year as Chinese firms finishing running down their inventories and global commodities prices rebound, said Xu Jian, an analyst at China International Capital Corp.

China's exports in 2008 rose 17.2% to $1.43 trillion and imports last year rose 18.5% to $1.13 trillion, said the person familiar with the trade data.

The country's trade surplus in 2008 was a record $295.46 billion, the person said, up from 2007's surplus of $262.2 billion.

The market had expected a 17.3% rise in 2008 exports, a 19.3% rise in imports and a full-year trade surplus of $289.2 billion, according to the survey of economists.

China's exports will fall around 5% in 2009, extending the weakness from the past two months, said Mr. Xu.

Mr. Xu added that Beijing will likely raise export-tax rebates on more products and ease trade financing but is unlikely to use a weak yuan as a tool to help exporters.

As for China's trade surplus, despite a narrowing in December, it stayed near historically wide levels. While ordinarily trade surpluses would be welcome, the performance in the past two months was of a different and worrying nature: the strong numbers were driven by a sharper decline in imports rather than faster growth in exports as in previous months and years.

My reaction: China's imports continue to crash much faster than its exports. While China's trade surplus did shrink 1 billion, it is still at an unsustainably high 39 billion dollars! A quick summary of China's trade numbers:

  • exports fell 2.8% to $111.16 billion
  • imports fell 21.3% to $72.18 billion
  • trade surplus totaled $38.98 billion

For more on why this is significant, check out the entry I made about China's imports last month:

*****Imports to China crash 17.9 percent in November*****

This entry was posted in China, Currency_Collapse, News_Developments, Trade_Deficit. Bookmark the permalink.

0 Responses to *****Imports to China fall 21.3 percent in December*****

  1. Robert says:

    The price of raw materials has tanked over the last few months - this would easily account for a 21% decrease in imports in terms of dollars.

    The more interesting question (which is not answered here) is whether there has been any significant decrease in the quantity of raw materials being imported or not.

  2. Anonymous says:

    I think its safe to say Robert that if exports are falling off a cliff and imports shrinking that commodity usage which goes into the manufacturing of these things are going down too.

    In fact expect lesser amounts of EVERYTHING to be used. We after all are in a deflationary environment at present and I still think we will use less matierial things even when inflation rears its ugly head.

    People aren't going be buying those Hula girl bobble heads for their dash boards in the economic conditions I foresee. It will be staples all the way, but they'll just cost more.

    Credit destruction causes demand destruction causes supply destruction which causes monetary inflation with a repeat of the above in a vicious feedback loop.

    The only investment I like better than gold right now is actual goods ie.shoes,clothes,staples. What we are dealing with in essence especially in the US is a massive decline in individual PURCHASING POWER keep that in mind as you make your preperations.

  3. Robert says:

    Exports are not "falling off a cliff" though. They fell just 2.8%.

    While people may not be buying "Hula girl bobble heads" the fact is that China now manufactures _everything_ and they do more efficiently than anyone else.

    As people have less money to spend they may actually buy more Chinese stuff than before in order to save money (see Walmart).

  4. Anonymous says:

    I'm confused...supposedly China's economy is crashing (leading to potential unrest,less buying treasuries, etc...at least according to "those" in the know. However if exports are down only 2 percent, it doesn't seem so dire.

    Meanwhile... bloggers say the dollar is doomed and Gold is a sure thing (only gold hasn't done much lately) & my dollars seem to buy more or less the same as in the immediate past, in fact, if I didn't get on the Internet, my rounds in coastal southern Californian wouldn't turn up anything unusual.
    Yes, the news says EVERYTHING is tanking, but my eyes haven't seen it yet (and no, I don't live in Santa Barbara, Malibu, Palos Verdes, Newport or La Jolla).

  5. Anonymous says:

    Roberts:

    Walmart just came out with disappointing earnings, which is extremely bearish.

    Also if you look at the correction in commodity prices (some down as much as 80 percent peak to trough) you know all you need to know about commodity usage world wide, of which China makes up a considerable percentage of that.

    China is prone to massage its economic numbers just as readily, if not more so than us. Their announced domestic "stimulus plan" wouldn't be necessary if their export market was so hot.

    Finally with the US loosing upwards of 500 thousand or more jobs a month, consumption of even staples are gonna go down. China needs to gear its manufacturing towards resource rich countries eg. Russia, Brazil,Australia and Canada. And work on developing new markets for low priced goods in Africa, Malaysia and Indonesia.

  6. Robert says:

    With raw materials down 80% it's hard to believe that Chinese imports are only down 21% in dollar terms.

    With such a huge decline in the input cost of the raw materials the only surprise about the 2.8% decline in exports is that they were only able to reduce their prices by 2.8%! If this number is really true it seems impossible to me that any actual decline in exports has taken place.. only the prices have gone down.

    Looking at the numbers in this article in isolation doesn't really tell us what is going on at all. The numbers could be correct and at the same time china could both be importing and exporting more stuff than ever before (albeit at lower prices). I'm not necessarily convinced that is happening (just trying to make a point) and as the last anonymous said the numbers may well somewhat massaged.

    It is entirely possible that demand destruction in other parts of the world (USA!) is responsible for most of the price decline in commodities.

    If chinese exports only decliend 2.8% on a 21% or 80% drop in imports/raw material costs then you could possibly draw the conclusion that the raw materials costs make up a very small proportion of the final cost of finished goods - thus their imports of raw materials are probably rather price insensitive.

    Hell.. there might not even be much real demand destruction even in the USA as a whole. The fact is that as long as the NYMEX crude prices (which are based on a very tiny proportion of the global oil trade) stay low - the OPEC producers will continue to sell oil at low prices - thus keeping oil prices in general low too.

    That global oil pricing is made based on actual physical oil flows through Cushing that are less than 1% (not talking about paper barrels here) of the global market should raise some concerns as to the legitimacy of this market as a basis for global pricing.

    If Asian oil traders get a supply cut from OPEC they can't just turn on a dime and ship oil all the way from Cushing, OK to make up the difference. It may well be that Cushing is somewhat anomalous and this translates into wild price changes all over the world. If there are an extra 500k barrels per day available at Cushing due to demand destruction nearby why should that cause massive price falls on oil exported from Saudi to Singapore?

    Sorry this turned into a bit of a ramble so I'd better stop now :)

  7. Robert says:

    Just came across a few fairly recent articles questioning the validity of the NYMEX benchmark.. this one in particular explains the situation quite well;

    http://biz.thestar.com.my/news/story.asp?file=/2008/12/27/business/2893102&sec;=business

  8. Robert says:

    Let's try that again:
    Link

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