The latest data from China provided little encouragement for the bulls. China returned to a trade surplus in March, with exports up 8.9% year on year, compared to a growth of 6.9% on average during the first two months of 2012. But shipments to Europe, China’s biggest market, fell by 3.1% from a year earlier. Imports were a disappointment, expanding by an annual 5.3%. Import growth was weaker than export growth over the first quarter. Inflation rebounded in March, climbing by an annual 3.6%.
What the commentators said
The trade data “confirms the weakness” in both the domestic and external economies, said HSBC’s Qu Hongbin. The latter is set to deteriorate further, given that “the EU debt crisis is still unfolding and the US remains likely to face a bumpy recovery”. Imports for processing and re-export “have been flat for some time”, added Capital Economics, indicating that exporters have subdued expectations for future order growth.
As for the domestic economy, non-commodity imports for domestic use have fallen sharply since November, as Capital Economics pointed out. In addition, the latest HSBC survey of manufacturing shows that activity is shrinking, and there has been “weak data in everything from industrial company profits to power usage”, said Jamil Anderlini in the FT.
But the scope for boosting the domestic economy looks limited as monetary policy is loose and there has already been a state-mandated lending binge to boost infrastructure. “All the bullets were spent a couple of years ago,” said Yuan Gangming of Tsinghua University.
The world looks to China to drive global growth. But the country isn’t yet big enough to do that, said Satyajit Das in The Independent. Its GDP is still just a fifth of the combined output of America, Europe and Japan. The popular notion that Chinese consumption can make up for falling consumer spending in the developed world is “fanciful”.
Its consumption is only a little more than France’s. Still, China is certainly big enough for its likely hard landing to affect global growth though falling demand for commodities and industrial goods. Its debt-fuelled investment “feast is coming to an end”.