Chinese private consumption could not have created an annual trade deficit since it is not strong enough to reverse the trade surplus. The imports are still dominated by commodities and components for re-export, not by consumer goods for domestic demands.
The narrowing trade surplus has been caused by an increase in import prices, greater machinery and components imports, and slower growth in exports compared to recent years.
The slight decrease in commodity demand has not been enough to offset the increase in commodity prices, which may lead to more inflationary pressures.
Chinese export growth will be limited in the coming months due to sovereign debt worries and weaker consumption growth in U.S. and Europe.
The rise of the RMB against the USD will be gradual and expected to start happening during the second half of 2010.
The size of the China trade deficit in March was larger than the consensus prediction due to the higher cost of commodity imports and seasonality factors.
Some analysts believe that the 2010 China trade surplus should be larger than the 2009 one because in real terms China’s exports are growing faster than its imports and the global economy is recovering. I, personally, wouldn’t hold my breath on that one.
China beat Germany to become the world’s largest exporter in 2009.
The low-value-added processing trade has been discouraged by the Chinese government in 2008 but encouraged again after the financial crisis emerged.
y/y figures portray an accurate pictureduring normal times, but during fast-changing times they may blur trends.
BoomBustBlog China-related links
- A Summary and Related Thoughts on the IMF’s “Strategies for Fiscal Consolidation in the Post-Crisis
- What Are the Odds That China Will Follow 1920’s US and 1980’s Japan?
- Signs of a China Credit and Real Asset Bubble Are Now Unmistakable!
Subscribers should reference the following related topics/documents:
Additional and relevant commentary on the bubble in China:
- It Doesn’t Take a Genius to Figure Out How This Will End
- Can China Control the “Side-Effects” of its Stimulus-Led Growth? Let’s Look at the Facts
- HSBC is Performing as Expected
- Part 2 of the Mechel Overview is Available
- Some Light Shown on My Developing China Thesis
- Follow Up to the China Short Thesis Debate
- China’s Most Expensive Export: Price Inflation
- Believe Those China Growth Stories at Your Own Risk – Just Ask Google!
- He Who Bloweth the Bubble With Wet Lips Should Stand Back Lest Spittle and Saliva Spray Upon Ye Face
- Goldman Seems to Trust the Chinese Economic Reporting a Tad Bit More Than I Do!
- All of my warnings about China are starting to look rather prescient
- Now that the world is forced to agree with Reggie on China’s growth propsects…