China Trade Balance Plunges To 11-Month Lows As Exports Crash Over 25%

Tyler Durden's picture

Worse than expected is an understatement.

Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline - the longest ever. Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows.



So much for that whole "devalue yourself to export growth" idea...


As Bloomberg notes,

China’s exports in yuan terms fell 20.6% year on year in February, down from a 6.6% drop in January, and missing expectations of an 11.3% fall. Imports were down 8.0%, an improvement from January’s 14.4% drop. The trade surplus came in at 209.5 billion yuan ($32 billion), down from 406.2 billion yuan.


The Chinese New Year holiday, which fell at the start of February in 2016 and in the middle of February in 2015, distorts the data in unpredictable ways. Holiday effects mean the outsize drop in February exports overstates the weakness in China’s factory sector.


Even so, looking at a year-to-date figure for the first two months of the year, the picture is only slightly less gloomy. In the year through February, exports are down 13.1%.

Even Goldman knew it was futile to try to explain the collapse using the tired "Lunar New Year" excuse:

February export growth was much weaker than expected while imports growth was modestly below expectations. Part of the fall in yoy growth was due to Chinese New Year effects. Exporters tend to front load their activities ahead of the festival and often do not resume full output until well after the golden week holiday. These effects occur well before and beyond the golden week holiday around the festival. In 2015, as the festival was very late (February 19th, which is quite late vs. most years), 2015 January data was largely undistorted, February data was distorted on the upside and March on the downside. This year’s festival happened much earlier on February 9th which means January data should be stronger, February weaker, and March stronger. Despite these distortions, January data was very weak which suggested underlying growth momentum was weak as well—an impression confirmed by today’s data. While January-February data is distorted on the downside and March data is likely to show a large yoy improvement, 1Q data as a whole will likely to be on the weak side as such. Weak global growth, an elevated level effective exchange rate, and falling export prices (-6.1% yoy in January, not available yet for February) all played a role in the weakness in our view.

Some more details:

Exports by destination data showed yoy growth of exports to all major trading partners deteriorated in February, compared to January. Exports to US fell 23.1% yoy in Feb, vs -9.9% in January. Exports to Japan were down 20.1% yoy in Feb, vs -6% in January. Exports to EU declined 19.8% yoy in Feb, vs -12% yoy in Jan. Exports to ASEAN fell 33.4% yoy in Feb from -18% yoy in Jan, and exports to Hong Kong went down 24.7% yoy in Feb, from -4% yoy in Jan.


Import by key commodities data showed some improvement in February, compared to January. Iron ore import volume was up 8.3% yoy in Feb, vs +4.5% yoy in Jan. In value terms, imports of iron ore were down 34.4% yoy, vs -33.3% yoy in Jan. Crude oil imports were -23.9% yoy (+24.4% yoy by volume), vs -42.4% yoy in Jan (-4.6% by volume). Refined petroleum product imports fell 24.8% yoy by value (-1.5% yoy by volume), vs -24.2% yoy in Jan (+13.3% yoy by volume in Jan). Steel product imports were down 14.6% yoy (6.8% by volume), vs -30.7% yoy in Jan (-19.5% by volume). Unwrought copper import value was +15.8% yoy (+48.7% by volume), vs -20.9% yoy in Jan (+6.1% yoy by volume). 


This weakness in exports has likely put significant downward pressures on activity growth, which appears to have been weak since the start of the year, and could have contributed to the decision to ease policy further in recent weeks. Policy easing since late 2015, intensified recently, has likely supported domestic demand growth which in turn boosted import growth. Although import growth was weak, it is not quite as weak as exports growth because a sizable share of it is for domestic demand instead of eventual re-exports. Having said that, the credit loosening in January likely was well beyond the intended magnitude in our view. We believe this led to unrealistically high policy expectations especially in terms of the amount of liquidity supply in February which is likely to be another disappointment (we are forecasting February RMB loans to be Rmb800bn, lower than last February’s Rmb1 tn, while the market consensus is expecting it to be higher than last year’s at Rmb1.2 tn despite adverse seasonality).  


Although year-end trade targets are no longer a binding constraint—the NPC declined to issue export targets for 2016--trade data may still be distorted by reporting issues, as capital flows continued to be significantly negative even though the size of flows likely fell in February judging from CNY trading volume and reserve changes. This is especially true for imports, where over-reporting is likely a function of outflows. A further rise in imports growth from HK (to 88.7% yoy) could be an indication of this. The bottom line is that while the import data probably do reflect more stable domestic demand growth, they may nonetheless overstate the strength of domestic demand due to ongoing capital outflow pressures.

As a reminder, China's policy response has already been announced. The National People’s Congress set a target for 13% growth in money supply in 2016, up from 12% in 2015, and a 3% of GDP fiscal deficit, up from 2.3%. In other words: more lending and more public spending to provide a boost to demand. In the short term, that shores up confidence in the growth outlook. Medium term, of course, there is a price to be paid.

Stocks are mounting a modest rebound on this terrible data (moar stimulus hopes) but after $1 trillion of new credit in 2 months, is there seriously anyone left who thinks moar will help?

We leave it to Borat to explain the Chinese authorities take on this data...

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kotfare17's picture

As I predicted in 2013 on this blog.

QE and zirp will cause decline and collapse  of world trade.


1914 anyone?

back to basics's picture

The sooner, the better. Time to reset this fucked up ponzi.

Antifaschistische's picture

China (more power to'em) has been draining the western world of it's wealth for the past 30 years.  Everyone has an opinion about this, but it doesn't really matter.  Their productivity has rearranged the world economic landscape.  But now, the world is running out of money, and eventually the strategy must change.  US gets a 'free pass' because everyone needs dollars for we get to export dollars, while the rest of the world scratches their head and figures out what they can sell in WallMart, Home Deprt, Car Dealerships, gun shops, etc.

general ambivalent's picture

Who will capitalise the capitalists?

remain calm's picture


Suckerman's picture

You probably mean decapitalize? or better decapitate?

Oldwood's picture

And yet, we still have a trade deficit.

johngaltfla's picture

Da shit dun hit da fan.

In all seriousness however, this is the validation of the JPM short call as a massive wave of deflationary pressure is about to hit the equity markets and earnings. But those who think you can blow more financial bubbles out of your butt, keep on buying AAPL and other insane bubbleicious stocks. Because deflationary crashes NEVER end well.

Iam_Silverman's picture

"a massive wave of deflationary pressure is about to hit the equity markets and earnings"

Mmmmm, cheap stocks!  Imma gonna getmesommadat!

So, you are predicting a major buying window is about to open?  BTFD?

johngaltfla's picture

Let me put it this way. I predicted at the end of 2015 that AAPL would break below $80 per share. $60 seems possible now.

Iam_Silverman's picture

" $60 seems possible now."

You don't think that they'd defend $80?  Maybe if they secretly changed its weighting in the Dow it wouldn't be so dramatic, and heck, maybe no one would even notice.  But, I think that they will POMO it back to help bolster the DJIA.

MountainsRoam's picture

Get out the knives, swords, and machettes and start slashing up these PUMPED UP PIG stock markets.. BLOOD ON THE STREETS is coming very soon..

NoPension's picture

Greece, ISIS, European Muslim invasion, Greece again, Puerto Rico, Venezuela, CHINA!, oil, oil, OIL..., NIRP, zeka, global warming, Fukishima, Obama, Trump, Hillary, Corzine, Bush, $20 trillion debt, Ft.Knox probably empty, Social Security insolvent, post office, Flint, infinitum.

And not a fucking thing seems to ever go wrong. Oil is going back up, and we are awash in it. Gold and silver is down, and 90% is paper. EBTcards still work. .gov pensions still rolling.

I'm beginning to think this fantasy will just go on.

I feel like a fucking fool anymore worrying about it. More to the point, I look like a fool to actual idiots, which it seems, populate most of our country.

Rant off.

Seek_Truth's picture

"and ye, then, become ye ready, because at the hour ye think not, the Son of Man doth come.’ - Luke 12:40

RadioFlyer's picture

Ye, doth. It's another language.

Pope Clement's picture

I suspect seeks head will explode when it at finally becomes apparent that the evidence is incontrovertible that the 'Son of Man' is non other than the arch imperial scumbag Titus Caesar.... YouTube Caesar's Messiah for details and amelioration of a most sucessful mind fog operation. As the author of the gospels (FlaviusJosephus) noted this literary masterpiece was created to control the slaves and scum of first century Palestine.

Pheonyte's picture

Kyle Bass must be salivating.

The Duke of New York A No.1's picture

Reaching for my BARF BAG.

Squid Viscous's picture

Ho Lee Fuk

wake up the PPT

Ditch's picture

Hmm an export economy suffers cliff like fall in exports, makes me think the problem just might have started in the E.U. and U.S.

But no recession reported. Hmmm.

Truth bomb or just blame China. "It's them commies fault" will be heard from coast to coast..

undertow1141's picture

This is just like an asteroid coming right at us, they ain't gunna say shit till the public is staring at it in the sky at noon.

Kirk2NCC1701's picture

Yes. That would be SOP for both Gov and Big Biz.

Oldwood's picture

Mirror, mirror, on the wall, who's the bestest of them all.

As long as we keep asking the mirror all will be well.

Iam_Silverman's picture

"an export economy suffers cliff like fall in exports, makes me think the problem just might have started in the E.U. and U.S."

Well, I blame Venezuela.  I read on this site yesterday that they are experiencing a financial meltdown.  Once they ran out of money to buy things, that's when China went to shit.  Yeah, let's blame some EM countries for not doing their part!

See, I could work for the IMF.

Captain Chlamydia's picture

Lehman moment in 5,4,3,2...

ChargingHandle's picture

Hmmmm. So if we the United States are buying 25% less from China, what does that say about the consumer based economy in the US?

undertow1141's picture

Ding ding ding, winner winner chicken dinner.

Pheonyte's picture

It's toast. Apparently it never occured to the central planners that consumers buried under a mountain of debt might stop consuming.

Oldwood's picture

What? I was supposed to be buying more Chinese crap?

TrustbutVerify's picture

So, doesn't this mean less foreign made junk being imported here?  And less of our money going to China?  And maybe more people have a bit more money to buy things made in the USA to bolster the USA economy?  

undertow1141's picture

It means thinnly stocked/out of stock walmarts, home depots, lowes, targets coming soon.

TrustbutVerify's picture

Time for the US citizen to man-up...if there are any real men left. 

khnum's picture

Expect a 'mystery' buyer to purchase a shitload of Walmart tommorow to prop up an index.

Mr. Bones's picture

Will there be time for a few "China is contained" headlines to lure in some more retail investors before the feces strikes the rotating oscillator?  Inquiring cephalopods need to know.

starman's picture

Does this mean the 7%growth is off?

Mr. Schmilkies's picture

Still there but seasonally adjusted.

Dr Freckles's picture

CHINA is heading towards a period of great political and social strife - perhaps even another civil war.

Kirk2NCC1701's picture

Wow, compared to Putin and Russia, these guys are a pushover for TPTB in NY.

Which is why I'll take Vegas bets on Zios over Mandarins all day long. Sorry, I'm an Empirical Evidence kinda guy.

Bunga Bunga's picture

Why export when you can flip house? China just copied the US economy sucessfully.

Kirk2NCC1701's picture

The brains that copy are not the same as those who invent. I'm betting accordingly.

Squid Viscous's picture

millions of self styled Tom Vu's can lift the whole economy? who knew

NoWayJose's picture

So, since when does stimulating YOUR own economy help you to EXPORT more? If the Chinese would have given ME the 2 trillion, I would have promised to buy 1 trillion worth of Chinese junk and import it into America. Now THAT would have helped their economy.

Azwethinkweiz's picture

In 1929 at the start of the Great Depression, when the United States exported everything other than spices to the world, net exports were down 10.7%. Now that we live in a "global economy" where China exports everything to the world thanks to credit expansion, Chinese exports crashing 25.4% only signals a possible near worldwide recession. Is there a ZH emoji for sarcasm?

Before and during the Great Depression, there was no credit. Need a loan? People asked a wealthy family member or friend or, how loans, credit, mortgages, etc., originated (and should be), seek help from your church or temple. Need food? Before modern EBT bread lines, stand in line (with patience and civility) or ask friends, family, church or temple (who were always [then people had integrity] happy to help). Can't afford to dine out at the speak easy and waste your money on back room gambling and booze? Sorry, no ATM or extended credit limit on your plastic card. Deal with the consequences of a broken leg.

THIS IS THE GREAT DEPRESSION. Probably, a GREATER depression masked by free money and circus tricks. No politician can save us now, it's up to us as a society to pull our heads from out our asses and wake up. I've been on this site now for 5 years....I'll probably have the same rant 5 years from now. What the fuck is wrong with people!?!?! Erin Andrews got $55 million awarded to her....this is why our insurance bills are sky high. In a sane reality not run by attorneys, the judge would've asked each member of the jury what's the most each of you would pay to see her breasts. Take the average of all on the jury and use that as the settlement.....$55 millions would be justly dwindled down to MAYBE $200.

Rod Serling for President!

Bull Bear Nice Pair's picture

"Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows."

Since Chinese New Year was in February, only an idiot would have expected the trade surplus would be as high as $51 billion in February, especially China already had a record-breaking trade surplus of $60 billion in January.