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China December Gross Trade Surges To Record, As Trade Surplus Plunges

Tyler Durden's picture


For all seeking a reason why China will never voluntarily drop its CNYUSD peg, and why it will now actively buy PIIGS debt indefinitely, in its attempt to keep its currency low against the EUR and fixed against that ultimate debaser of currencies, just take one look at the December trade surplus. Even as gross trade surged to an all time high with total imports and exports just shy of $300 billion, at $295.2 billion, December's trade surplus plunged from $22.9 billion in November to just $13.1 billion, the lowest since March and April when China actually had a stunning trade deficit, and a nearly 50% miss to consensus which was at $21.4 billion. The total 2010 trade surplus was $183.1 billion, down from $196.1 billion in 2009 and $295.5 billion in 2008. This means China has increasingly less linen (primarily dollars) to recycle in purchasing such items as copper and gold, and, to a much lower degree, US Treasurys. As the charts below demonstrate, the drop in exports was largest to the US (down 16.4% sequentially), the EU (down 11.5%) and, to a lesser degree, the Rest of the World (- 9.1%). Bottom line: should the EUR hit parity with the USD, and should the CNY continue appreciating vs the USD, this trend will get increasingly uglier, slowing down the Chinese economy even more, which in turn will continue to make the case for a China-led rebound ever weaker, and the case for increasing Fed UST monetization ever stronger (in the absence of Chinese purchasing power). Welcome to the connected world, where monetization is really an indication of weakness.

Some more statistics from MNI:

Exports in the month grew 17.9% y/y, with the growth rate roughly half the 34.9% expansion recorded in November. The median MNI survey forecast was for growth of 22.2%.

Imports expanded 25.6% y/y, as against a rise of 23.5% in November, and higher than MNI's median forecast of a 23.5% expansion.

For the full-year 2010, exports were up 31.3%, while imports grew 38.7%, customs said.

"China has fully shaken off the impact of the global financial crisis," customs statistician Zheng Yuesheng told state television in a broadcast shortly after the official release.

U.S. government data showed the trade deficit with China approaching $227 billion as of the end of October.

And some charts showing the surprising non-seasonal plunge in December net exports:

Total Chinese imports and exports by country:

The same, with breakdown by key trading partners:

Trade surplus by country - US:


and the ROW:

And what would a glaringly negative data point be without the requisite Goldman attempt at spin. To wit:

Exports growth decelerated to 17.9% yoy in December from 34.9% yoy in November (our forecast: 20.0% yoy, consensus forecast: 23.3% yoy). The implied month-on-month; seasonally-adjusted; annualized (s.a. ann.) growth rate was -5.2%, down from 109.3% growth recorded in November.

In terms of exports by destination, exports to ASEAN and Japan have been relatively weak with respect to the overall yoy exports growth. In terms of exports by product, high-tech products and mechanical and electrical products are the key drivers for the weak yoy exports growth.

Imports growth softened to 25.6% yoy in December from 37.7% yoy in November (our forecast: 23.5% yoy, consensus forecast: 24.9% yoy). On a mom s.a. ann. basis, imports growth was 26.6% in December, down from 126.7% in November.

In terms of imports by country/region, imports from the EU and US have been relatively strong with respect to the overall yoy imports growth. In terms of imports by product, crude petroleum oil and steel products have been particularly weak in December.

The level of trade surplus fell to US$13.1 billion from US$22.9 billion in November (the year-to-date trade surplus is US$183.1 billion). After making seasonal adjustments, the level of trade surplus fell to US$9.1 billion in December from US$12.3 billion in November.

Key takeaways:

The fall in yoy exports growth was the result of a very high base and a moderation in sequential growth after two months of exceedingly strong sequential growth in October and November. We believe the underlying growth momentum of exports remains healthy as our Global Leading Indicator and the exports orders sub-index in the PMI have been consistently pointing to stronger external demand growth. We believe policy makers will also take the base effect into consideration when they look at the data and hence a lower yoy growth does not necessarily imply policy makers will change currency and other policies because of renewed concerns on exports growth . Therefore, we are not revising our 6% annual CNY/USD appreciation forecast.

While the fall in imports yoy growth was affected by a high base as well, its sequential mom growth remained at a very strong level (unlike exports). Rising import prices amid higher upstream raw materials prices contributed to this strong reading. Given the trade price indices are typically released with a half-month lag we can not know what happened to real imports growth for sure for now. Having said that, our estimate suggests real imports growth probably held up reasonably well despite the apparent weakness in the December PMI though this estimate is subject to high margin of error.

The downward trend in the trade surplus in recent months, especially after making seasonal adjustments, appears to be a very positive development which indicates the economy is getting more balanced at the margin. However, one of the main drivers of the fall in the trade surplus was the domestic economy is facing (overly) strong demand and restricted supply, because of energy intensity goals and the Asian Games, which encourages more imports than otherwise. This means the strong imports growth currently is not sustainable. It also tends to result in higher import prices and a worsening of the terms of trade (TOT) which represents a direct welfare loss for the Chinese economy. As these supply-side restrictions are at least partially lifted in the new year and the government takes more actions to dampen domestic demand to control inflation, we may see the underlying trade surplus widening once again in the coming months (though the un-seasonally-adjusted level of surplus may still fall on seasonality).

Or not.


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Mon, 01/10/2011 - 07:55 | Link to Comment RaymondKHessel
RaymondKHessel's picture

Time to buy the VIX

Mon, 01/10/2011 - 08:00 | Link to Comment goldenbuddha454
goldenbuddha454's picture

Awesome article, none better than Zerohedge.

Mon, 01/10/2011 - 08:06 | Link to Comment Sudden Debt
Sudden Debt's picture

I wonder how long it will take for China to also start printing Dollars.

As we all know the Chinese don't have the technology to copy a 100 dollar bill... whatever, It's not because the US is playing a dirty game the Chinese would do the same... whatever, the US will clearly win a currency game because they have more reserves then the Chinese and is still the industrial engine of the world... whatever, Americans have bigger dicks than Asians, at least that's still true.

Mon, 01/10/2011 - 08:32 | Link to Comment YHC-FTSE
YHC-FTSE's picture

Make that Americans have bigger cunts than Asians, and you'd be right. Smelly Goldman cunts who wrote the spin in this article for example. 

Mon, 01/10/2011 - 08:26 | Link to Comment YHC-FTSE
YHC-FTSE's picture

The last paragraph in bold reads as though it was written by a schizophrenic with a penchant for vagueness. People actually read this shit from Goldman and nod sagely? Unbelievable.

Mon, 01/10/2011 - 08:43 | Link to Comment Thepnr
Thepnr's picture

The import and export figures priced in dollars don't tell the whole story. China has slowed it's imports of raw materials in recent months though has been paying higher prices for these commodities.

No doubt finished goods too are stacked in containers at ports throughout the country looking for buyers but there are no takers.

If China continue to reduce their demand for raw materials then that doesn't bode well for commodity prices as highlighted in this article from seeking alpha.


I called a friend in Athens who is in the shipping business. On the question, “Why the drop” I got the murky answer, “It’s a lotta things all at once”. Some specifics he mentioned:

  • The floods in Australia have tied up ports and cargos. Therefore there are many ships looking for a load while the country dries out. This puts downward pressure on the BDIY. This is a short-term phenomenon.
  • Many new ships have come into service in the past 18 months. This is part of the boom/bust cycle in new construction/shipping rates. His words, “There is no shortage of ships today, prices look soft.”

So we have both long and a short-term factors weighing on the BDIY. The short term one is going away, a possible conclusion is we see a bounce in the index soon. On this type of thinking I got this response:

  • Maybe, maybe not. The biggest driver in shipping is China. They have been importing all manner of raw materials and finished goods for two years on a massive scale. That trend has slowed markedly in just the past sixty-days. There is no indication that it will resume at anytime soon.

I ask, “Of the three things weighing on the BDIY which is most important?” Answer:

  • China trumps everything. It's not just shipping rates; all the froth in the commodities market is at risk.
  • Mon, 01/10/2011 - 08:57 | Link to Comment TruthInSunshine
    TruthInSunshine's picture

    The decoupling of the myth from reality of BRIC driving world consumption at a time of pervasive and enduring U.S. & Euro weakness, culminating with the crash & subsequently "discovered" sham that is Chinese Government statistics on economic matters (actually worse and less accurate than the U.S.'s), will be the story of this decade.

    Mon, 01/10/2011 - 10:18 | Link to Comment Cash_is_Trash
    Cash_is_Trash's picture

    China's Surplus decreased because Americans are less and less able to purchase their products with a dollar in decline.

    The fall in yoy exports growth was the result of a very high base and a moderation in sequential growth after two months of exceedingly strong sequential growth in October and November.

    ... The previous is total propaganda not taking into account a weakening dollar and the fact that without proper industrial production and manufacturing in America, we offer less and less goods to sell the Chinese and others.

    We will win this currency war by destroying what's left of our economy.

    - Take that to the bank -

    Mon, 01/10/2011 - 11:20 | Link to Comment TruthInSunshine
    TruthInSunshine's picture

    I wasn't aware that the CNY/RMB appreciated significantly vs the USD.

    Do NOT follow this link or you will be banned from the site!