Analysis: Germany and China compete on exports
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The race for the title Exportweltmeister [world export champion] is likely to continue this year.
Germany’s latest trade surplus was larger than China’s, however, recent Chinese export data topped analysts’ expectations while Germany’s disappointed.
The General Administration of Customs reportedly said today that China had accumulated a trade surplus of $7.6 billion (£5.1 billion) in February.
According to provisional data released by the Federal Statistical Office, Germany accumulated a trade surplus of €8 billion (£7.3 billion) in January. It exported commodities worth €63.9 billion and imported commodities worth €56 billion.
China’s trade surplus shrank to the lowest level in a year but exports rose by a higher-than-expected 46% and imports rose by 44.7% in February.
Diana Choyleva, a director at Lombard Street Research, writes in her Daily Note the composition of China’s imports and their growth dynamics are bad news for commodity bulls.
On a year-to-year basis, German exports increased by 0.2% and imports decreased by 1.4%. Compared with the previous month, the calendar and seasonally adjusted development of exports and imports showed opposite trends. (article continues below)
Johannes Müller, an analyst at DWS, says the latest export data is “miserable” and much worse than expected.
The Federal Statistical Office gave no reason for the drop in exports. Several German news reports blame the cold weather. However, Müller says the weather is currently being used as a “stock excuse” for everything that does not match predictions or fulfill expectations.
“There has been a structural shift in the trade balance between Germany and China”
Yet he has no other explanation. “If this does not reverse, we will have to rewrite our expectations for 2010,” he says. Müller says a growth rate for the eurozone is likely to be about 1.3% this year, with Germany being somewhat above the average.
Müller says more interesting than their individual trade balances is the inter-trade between China and Germany.
“There has been a structural shift in the trade balance between Germany and China,” Müller says. In previous years, Germany has had a negative trade balance with China. However, this has now reversed.
Overall, Germany has benefited from China’s structural export changes.
The recent export data is likely to increase pressure on the Chinese government to raise the value of the renmimbi. In the past years, it was Americans in particular that said China’s currency is undervalued.
As China has maintained the renmimbi peg to the dollar, the economy has industrialised to the extent that it earned the title of “manufacturing hub of the world”. But this occurred at the expense of realising the full gain in terms of higher domestic incomes.
Choyleva says if China was to allow its currency to appreciate significantly, it should be beneficial, especially if in the context of opening up the capital account. “But mercantilist attitudes continue to prevail, pushing policy in the direction of buying up natural resources and stockpiling commodities instead,” she says.
