So much for the green shoots theory, at least as far as an early Chinese recovery is concerned. From AFP (hat tip reader Michael):
Chinese exports fell 22.6 percent in April from a year earlier in the sixth straight monthly decline, state media said Tuesday,…
Exports from the world’s third-largest economy totalled 91.94 billion dollars last month…
The drop was larger than that recorded in March, despite hopes that China’s exports performance would start to improve.
Commerce ministry spokesman Yao Jian said in April that China was confident exports would improve “on the basis of the gradual recovery seen in the first quarter.”
Exports in March fell by 17.1 percent year-on-year, narrowing from a 25.7 percent dive in February, the worst slump in more than a decade.
The Wall Street Journal’s headline, “China’s Export Decline Steepens But FAI Accelerates,” nevertheless tries to slather lipstick on this pig, although the text is a more evenhanded:
A fragile external outlook as shown by China’s deepening export decline in April may damp hopes accelerating local investment and massive credit growth will drive an early recovery in the world’s third-largest economy.
Chinese exports in April fell 22.6% from a year earlier, and imports fell 23.0%…The decline in exports in April was sharper than March’s 17.1% drop and the median forecast of an 18.4% decline in a Dow Jones Newswires survey of 16 economists. The decline in imports was narrower than March’s 25.1% plunge, but wider than the poll’s median forecast of a 22.0% drop..
Fixed-asset investment in China’s urban areas in the January-April period grew faster than expected, rising 30.5% from a year earlier and accelerating from the first-quarter’s growth rate of 28.6%, the National Bureau of Statistics said Tuesday.
The investment data reflect how Beijing’s stimulus program, which is focused on public infrastructure investments backed by a flood of bank credit, has helped stabilize the economy.
But the Financial Times tells us that the banks in China are putting the brakes on the cheap lending that helped fuel the investment boom, so it would appear some loans were not necessarily going to investments that have good odds of being productive. And even more important, China is experiencing its third month running of deflation, a factoid that hasn’t attracted much notice in the MSM, If it continues, indebtedness and deflation are a toxic mix, and are likely to pave the way for banking sector woes:
Chinese bank lending slowed dramatically in April because of fears that loan growth in the first quarter had been excessive and could pave the way for loans of deteriorating quality, so possibly creating a new round of asset bubbles.
China’s state-dominated banks gave out Rmb591.8bn ($85.2bn, €62.5bn, £56.3bn) in new loans last month, less than a third of the Rmb1,891bn in new loans extended in March, but still well above the monthly levels of recent years.
In the first quarter, Chinese lenders answered the government’s call to open the credit taps and get the economy moving again, extending more than Rmb4,600bn in new loans – more than the entire amount of new lending in 2007.
That led to fears among regulators that money was being funnelled illegally into the stock market and handed out to state-sponsored stimulus projects of dubious commercial value that could become non-performing assets.
Some regulators also worried about the potential for rampant inflation. Those fears were somewhat eased by price measurements released on Monday showing China remained in deflationary territory in April for the third consecutive month.
The consumer price index fell 1.5 per cent from a year earlier in April, compared with a fall of 1.2 per cent in March, while the producer price index fell 6.6 per cent after falling 6.0 per cent in March.
Chinese bank lending is usually strongest in the first quarter and moderates as the year goes on. However, the abnormally steep April drop raises some concerns that China’s nascent economic recovery could flounder without the injection of huge volumes of new loans.
We had noted in February that some experts thought as much as 1/3 of the new loans were going into the stock market rather than fixed investment. Michael Pettis had also reported that some of the loans were sham transactions to meet government targets.
Update 2:30 AM Bloomberg falls into the lipstick-painting camp with its headline: “China’s Investment Surges 30.5%; Exports Decline “
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We sell everything at a loss, but we make it up in volume.
¨……. Chinese exports in April fell 22.6% from a year earlier, and imports fell 23.0%…..¨
Please note, these are reductions in dollar/remnimbi.
Given the very high commodity prices in the first half of last year, and the much lower commodity prices for the last months, the reductions in volume terms are significantly smaller – I recall a graph on another blog (sorry, forgot which one) showing import/export reductions in actual volume terms of about 9%, i.e. still large, but not as dramatic.
Asian stock markets don’t seem to like it and with good reason. The biggest bank lending spree ever and massive stimulus have failed to stop deflation accelerating in China. It can only be a matter of time before they try to devalue the currency to halt deflation. My guess is they will not have to do anything but to remove the dollar peg, which could not be accused of being protectionist. That would be bad news for US jobs and US treasuries, requiring the FED to step up its QE.
It is interesting that it is being suggested that China is curbing lending and I wonder if first quarter lending coincides with the administrations in other countries going all out to try to turn sentiment. Some thing does not quite seem right and I wonder what the loan losses being racked up by Chinese banks must be to cause the authorities to reign them in. Ultimately China will be buying a lot less US goods and services than it used to.
Very interesting things going on with China and its $575 billion stimulus. The SSE is up over 50% from its lows, construction of new factories is accelerating, but power usage is down (factories under construction don’t use power), and exports down sharply (factories not producing stuff don’t use power).
Too bad someone could not track the money flows in China from this stimulus. It appears, though I have no way of knowing for sure, that all the stimulus has gone into the SSE and into the construction of factories the country does not need.
With the assumption that job creation is one of the reasons to enact fiscal stimulus, why isn’t beijing trotting out employment stats on a daily basis?
(btw…If anybody has a comprehensive unemployment number that isn’t 4 months old, i’m all ears. But i would think lending the equivalent of 2008 in a few months should demand this?)
But maybe its just not generating employement.
This would make sense. Keep in mind that the private sector has “contributed up to 65% of China’s GDP, created more than 80% of new jobs, filed 65% of all patents for new inventions, and produced more than 80% of new products…” yet, “Open data revealed that in January alone, of the 1.62 trillion yuan new loans issued, some 90% had flowed to government projects won by state-owned companies through tender process.” (source)
generating employement by creating more factory capacity to make more things for countries that can’t afford/don’t want those products is ill-conceived, at best (i.e. china has no control over end-user demand abroad – or at home for that matter.)
re: carol — “Given the very high commodity prices in the first half of last year, and the much lower commodity prices for the last months, the reductions in volume terms are significantly smaller”
i’m not sure that would necessarily affect exports as much as it would imports…i could be wrong. either way, the fact that they continue to run a sizeable surplus means that they continue to siphon away net-demand (which is a rare commodity these days).
Which leads to a point that Krugman pointed out (the only time i will cite krugman is on trade…after all, the dude won the nobel prize for it), “there is a short-run case for protectionism — and that case will increase in force if we don’t have an effective economic recovery program.”
in my opinion, the fact that the asian surplus/west deficit has not reversed since this whole mess started makes me believe that we are nowhere near achieving an “effective ecnomic recovery program.”
When the US stimulus package was first announced, and plans already on board were needed, a lot of pork projects appeared.
Bureaucracies the world over being distressingly similar, I assume that China no better controls. And money was helicoptered.
The absolutely corrupt local party bosses borrowed the money to play the market. The less corupt dragged out plans available. What did every Chines village want?
A factory
re: carol’s question about commodities and their effects on $/yuan levels in the import/export data…setser just offered his opinion up…fyi.