China March Trade Report

Chris Balding’s tweets – a compilation (April 12, 2017)

Small storm on Chinese trade data: it is very difficult to reconcile Chinese trade data with reality on two fronts. Not saying false just really straining credibility. Two examples: Exports to Latin America were up 16.4% in January and 6.3% through February. March likely show more big numbers.

Question: where is growth strong enough to drive USD exports that will likely by 10%+ in Q1?

Brazil had nominal USD GDP growth of 2.5% Feb 16->Feb 17. Even on the low side that puts GDP to trade ratio at more than 2. After March, likely well above 3 or even 4. Export growth rates being claimed seem extraordinarily large for growth we see elsewhere. One other problem the difference between the USD and RMB trade growth rates is nearly exactly the change the drop in the RMB. Sounds logical but it isn’t.

When a currency drops, importers know that the local currency price has dropped and negotiate new prices with the exporter. Example US Acme imports from Chinese Acme widget at $100 implied conversion of 600 RMB. When RMB drops, US Acme renegotiates new price rather US Acme imports from Chinese Acme widget at $100 implied conversion of 600 RMB. When RMB drops, US Acme renegotiates new price rather split the currency difference so importer does not enjoy 100% of currency drop. However, Chinese data implies this is happening.

Volumes of product out of China remain decidedly soft. Not sure yet exactly what is happening but there is more here than meets the eye. Through January/February 2017, 70% of major export categories experienced declines in the volume of exports compared to 2016.

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