China Trade Swoons, Collapse of Containerized Freight Index Hits Worst Level Ever, Global Slowdown Worse than Forecast

Tuesday, November 10, 2015
By Paul Martin

by Wolf Richter
November 9, 2015

Who is going to pull the global economy out of its funk? No one knows. But it’s not going to be China – regardless of how many more times the central bank is going to tweak its policies and cut interest rates. That’s what China’s trade fiasco is saying.

Soothsayers were once again shocked on Sunday by just how far China’s imports and exports have deteriorated.

Exports dropped 6.9% in October from a year ago, to $192.41 billion, after a 3.7% drop in September, the fourth month in a row of year-over-year declines. Exports had peaked last December at $227.5 billion and have since dropped 15.4%.

Shipments to the US edged down 0.9% year-over-year, to the EU 2.9%, and to Japan, which is suffering from the Abenomics hangover, 7.7%. Is China’s economy getting the feverishly hoped-for boost from supplying the overseas holiday shopping season? Not yet.

China has been getting hit by two simultaneous forces: weak global demand and loss of competitiveness due to rising wages, land costs, and other expenses. It’s no longer the low-cost producer. And as it switches to robots for manufacturing, which it is doing at lightning speed, it has to confront a new reality: robots are the great equalizer; unlike labor, they cost the same everywhere.

Imports plunged 18.8% year-over-year to $130.8 billion, after a 20.4% cliff-dive in September, the 12th month in a row of declines. This isn’t weak global demand, but a swoon in demand in China. Part of the plunge is due to falling commodity prices and weak demand for commodities in China. But even then: for the first three quarters of the year, import volume, which eliminates prices as a factor, was down 4%. Imports peaked in Mark 2013 at $183.1 billion and are now down 28.6%.

The dismal import picture is a sign that China’s economy is weakening, including in key sectors like the property sector that the government has been trying to reflate. But no one can get a real handle on how weak the economy really is, perhaps not even the government. But it wants the rest of the world to believe that the economy grew at a phenomenal 6.9% in the third quarter.

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