China’s April Exports Fall 33% from 2008. 5% Further Than Expected

Monday, May 11, 2009 23:34
Posted in category The Big Picture

With my post earlier this week graphically showing China’s recent export trajectory, the news that April 2009 saw a 33% Y-o-Y dropmay suggest we have yet to truly turn the corner.

Not only is it 5% more than expected by analysts, it is the first month in the last 3 where the number has eroded from the previous month. Perhaps indicating the dead cat bounce may be over, and we are at the top of the next downhill slide (A topic Andy Xie’s recent piece speaks to).

With only the first reports in, it is hard to give much of an analysis at this point – or more appropriately the context behind the number, however a few lines from the Forbes article Amid Green Shoots, China’s Exports Still Barren offers a few interesting quotes:

The spring China Import and Export Fair, which ended last week, saw orders fall 17% from the fall fair, according to J.P. Morgan.

and

Exports in textiles, toys and plastics have shown signs of improving. But there are concerns that the stabilization is on the back of a restocking of depleted inventories, rather than a demand rebound. Li & Fung, a major supplier of consumer goods to Wal-Mart, said last week that some U.S. customers have been reordering to restock inventory levels, which are down from seven to four weeks, according to J.P. Morgan.

Most concerning for me, given the long term nature of this:

Morgan Stanley analysts have warned that China investors face a profit letdown, as the state-owned industrial sector prioritizes protecting jobs and produces in excess despite depressed prices. That excess output will still need to be absorbed by the West, as Chinese domestic demand cannot rise fast enough. With a boom in bank lending, China is making a “leveraged bet” on Western demand recovery by next year, rather than decoupling, they concluded.

A statement that, if true, would lead me to believe that any further fallout could have a knock on effect that would be greater than planned for. That essentially, China has built in a lot of risk into their plans, and should the plans not materialize for whatever reason, we could see effects whose ripples are large/ wide

UPDATE: From the FT China’s factory output slows in April, it appears that exports are not the only thing to slow down.

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