9 Mar 2016
Forces behind China's 25% export decline - BBH
Analysts at Brown Brothers Harriman explained that investors are skeptical of Chinese economic data.
Key Quotes:
"However, news yesterday that Chinese exports fell by a quarter in February shocked investors. Many worry about the implications not just for China, but for world growth. It comes as the IMF is signaling it will likely cut its 3.4% global growth forecast next month.
There are three separate forces that impacted Chinese trade figures. First are price changes. The dramatic drop in commodity prices, for example, distorts the value of imports (and exports). Chinese producer prices have been falling on a year-over-year basis for nearly four years. Second, there actually is a slowdown in Chinese trade, reflecting softer domestic demand and foreign demand.
However, the actual decline in trade was likely distorted by the Lunar New Year celebration. Third, with the threat of additional yuan weakness, there appears to have been a revival of tactics to using trade invoicing to hide capital flows (now outflows)."
Key Quotes:
"However, news yesterday that Chinese exports fell by a quarter in February shocked investors. Many worry about the implications not just for China, but for world growth. It comes as the IMF is signaling it will likely cut its 3.4% global growth forecast next month.
There are three separate forces that impacted Chinese trade figures. First are price changes. The dramatic drop in commodity prices, for example, distorts the value of imports (and exports). Chinese producer prices have been falling on a year-over-year basis for nearly four years. Second, there actually is a slowdown in Chinese trade, reflecting softer domestic demand and foreign demand.
However, the actual decline in trade was likely distorted by the Lunar New Year celebration. Third, with the threat of additional yuan weakness, there appears to have been a revival of tactics to using trade invoicing to hide capital flows (now outflows)."