Maybe the chaos in the Chinese stock market doesn’t say that much about the economy.
That might be the takeaway from China’s trade data released today, which presents a stabilizing economy, as much as one data point can.
Exports fell in December by 1.4% in U.S. dollar figures. Analysts surveyed by Bloomberg were expecting an 8% drop. Exports to Europe and Hong Kong drove the improvement, and even though the Chinese yuan fell in value against the euro in December, it did so to a greater degree in August, when China’s central bank devalued the currency by nearly two percentage points over two days. Some analysts said the better trade data reflected stronger overseas demand for Chinese goods more than a bump from China’s currency devaluations.
In any case, devaluations inevitably take some time to feed through into actual export performance. And much of the benefit of a cheaper currency can be offset if fears of major currency volatility lead companies to put off investments or big orders. In this respect, one encouraging sign from the last couple of days has been the stabilization of the yuan: the offshore yuan rate, which trades more freely than the still tightly managed onshore rate, has recovered sharply after the People’s Bank of China intervened earlier in the week against speculators who were pushing it lower.
Imports also beat analysts’ estimates. The volume of major commodities jumped in late 2015, suggesting more infrastructure building.
The export data, at least, reflects what other countries buy from China, and the uptick may be fleeting as recession fears creep up in the U.S. and Europe.
“Overall export growth for 2015 came in at -2.6%, a long way below the level in 2014, and also much lower than the 6% target initially set by policy makers,” Julia Wang and Jing Li, greater China economists at HSBC, wrote today. “Domestic demand will likely remain a more reliable engine of growth in 2016.”
Because of that, China has to hope its declining financial markets really aren’t predicting a reeling economy this year.