Chinese Exports Fall-Domestic Demand Rise

Some make a big deal of the big decline in the Chinese trade surplus in February. But looking at monthly numbers in isolation is potentially misleading for January and February in China because of the Chinese New Year. More meaningful is to look at the combined figure for January and February.

If you do that, you can see that the surplus rose compared to last year despite a significant decline in exports, as the cost of imports fell even more. The drop in imports is likely mostly caused by falling prices for oil and other imported commodities.

One interesting fact is that despite reduced foreign trade, domestic demand in China appears to be holding up well. Fixed investments rose 26.5% in January-February compared to the previous year and car sales also rose, though only 2.7%. However, compared to the 39% drop in the U.S. and similar declines in many other countries, that is very good.

A number of indicators, including power consumption and bank lending suggests that the Chinese economy continues to grow (though at a low rate of growth by Chinese standards) as a growing domestic market and lower commodity prices more than offsets the negative impact from falling exports.