China’s exports to the US break their long trend — up only 5% this year
China’s exports to the US are up only 5% this year, marking a sharp departure from their 25%+ recent growth rate. This astonishing bit of news is buried within this WSJ report on China’s economy and exports (which topped $1 trillion last year and grew at a 25% clip last year):
China’s quarterly trade surplus shrank for the first time in three years…The trade surplus in goods, the amount by which exports exceed imports, was $41.42 billion for the first three months of 2008, China’s Customs agency said Friday. That’s roughly 11% smaller than the $46.44 billion surplus for the same period of 2007. Imports for the three-month period surged 28.6% to $264.48 billion, while exports grew a less rapid 21.4% to $305.9 billion — with growth in exports to the U.S. especially slow…
Shipments to the U.S. are up just 5.4% so far this year, reflecting both weaker demand there and the rise in the Chinese yuan against the dollar. The yuan has however continued to depreciate against the euro – making Chinese goods cheaper for Europeans – and exports to the European Union are up 24.2%.
The US accounts for almost a third of China’s exports ($322 billion in 2007). That’s up from $50 billion in 1997, a growth rate of 22% over the period, which accelerated to 26% in the last five years. The abrupt slowdown in Chinese exports to the US is quite significant in our view, and heralds a likely slowdown in China’s growth within the next year that is greater than most observers currently foresee.
We should also add that the still robust growth in China’s exports to the EU are likely to show a slowdown in the next year or so, as growth in Eurozone GDP retreats from its relatively healthy 2.8% and 2.6% levels of the last two years to the forecast growth of 1.4% and 1.2% this year and next.
Long cycle expenditures such as infrastructure project spending and the like tend to lag the cycle in spending on consumer goods, so just maybe we are not so wrong after all about the economic problems in China that may lie just over the horizon. (There is no reason to build new factories in anticipation of 25% growth if growth becomes modest, after all — and the bank loans to such projects would have their own problems, etc.) Furthermore, in such an environment, the insane bubble that has enveloped commodity prices — in part due to the development projects of the BRIC countries — seems a fragile thing indeed.