Chinese export collapse heralds more bad news

The collapse in China’s exports last month was even worse than the headline figure suggests, says Mark Williams, an international economist at Capital Economics. Import data give no sign that the economy has bottomed out.

Exports declined by 25.7% on a year-to-year basis and imports by 24.1%.

Relatively mild contractions in exports over the previous three months had suggested China’s exporters were proving more resilient than their regional counterparts.

However, he says, the latest figures disprove this theory. After adjusting for the number of working days in each month, exports from China fell by roughly 40% on a yearly basis in February, having been stationary a month before.

Meanwhile, there is no sign of a steadying domestic demand.

Williams says if this continues, the question of whether the government should force the remimbi to weaken, which officials have been playing down, will return.

On the long-term outlook, Williams says China’s prospects for the next year are “pretty weak”. However, he adds, “China will continue to grow, which is more than we can say for most economies in the world.

“Growth will be much slower than in the past. It will take China several years to reach the same growth rates [experienced in the past].”