China: Poor trade data may overstate underlying dynamics – ABN AMRO

According to Han de Jong, chief economist of ABN AMRO, Chinese trade data took a decisive turn for the worse in December as the value of Chinese imports in USD was down 7.6% yoy in December, the first negative number since mid-2016.

Key Quotes

“It must be borne in mind, this data is about values, so the drop in oil and other commodity prices plays a role here. There may also be base effects and currency effects. In addition, Chinese importers may have tried to beat tariffs imposed on US products, which may have boosted the numbers when that happened, but which inevitably leads to a drop when it is over. The point is, however, that such a drop is temporary and overstates the underlying dynamics.”

“Another point to make is that a big chunk of Chinese imports are inputs to export products. So any slowdown of exports will translate in slower imports and is not necessarily a reflection of slower growth of the domestic economy.”

“Regardless of all these qualifications, the December data was weak and must be at least partly reflection either of slowing growth in China or resulting from the trade war. It is probably a bit of both. Having said that, the longer I look at this data, the more I am inclined to think they must be exaggerating the downturn.”

“The growth rate of the value of imports has collapsed from +20.3% yoy in October to -7.6% in December. It simply is unlikely that actual activity would have fallen off a cliff in such a dramatic way. Therefore, I am inclined to think that there is at least a glimmer of hope. Given that so many commentators are currently pessimistic, I think chances of positive surprises are increasing rapidly.”