Here's one for the "seriously, you're surprised?" file: China pegs its currency,
the yuan, to the dollar, the dollar soars, taking the yuan with it...and fewer
foreigners buy suddenly-much-more-expensive Chinese products. Duh.
China's
Export Engine Loses Steam, Adding to Growth Pressure
China's exports unexpectedly slumped last month, eroding the outlook for one
of the economy's better performing areas in recent months.
Overseas shipments fell 14.6 percent in March from a year earlier in yuan
value, the customs administration said in Beijing on Monday. That compared
with the median estimate for an 8.2 percent rise in a Bloomberg News survey
of analysts. Imports slid 12.3 percent, leaving a trade surplus of 18.16
billion yuan ($3 billion).
The export declines come as China grapples with overcapacity and a property
slump. The country's central bank has relaxed rules on home purchasing, cut
interest rates twice and reduced the ratio of reserves banks are required
to set aside in the past six months, with economists forecasting further
stimulus.
"Consumption is weak, investment is decelerating, and now exports have come
in as weaker-than-expected," said Liu Xuezhi, an economist with Bank of Communications
Co. in Shanghai. "Downward pressure on economic growth is increasing, making
it more urgent for the government to start rolling out more pro-growth policies."
The Hang Seng index in Hong Kong pared gains after the release and the Australian
dollar, seen as a proxy for China's economy due to Australia's shipments
of raw materials, fell.
Gross domestic product data scheduled for Wednesday will probably show the
economy expanded 7 percent in the first quarter from a year earlier, according
to the median estimate of 38 economists in a Bloomberg survey as of April
10. That would be the slowest pace since the first quarter of 2009.
The "dismal" March export performance comes despite a higher number of working
days and a low base and will spur fears that foreign demand is being undermined
by a stronger yuan, Dariusz Kowalczyk, senior economist at Credit Agricole
SA in Hong Kong, wrote in note after the release.
The yuan may weaken and onshore rates will be lowered, he wrote. "Odds are
also rising for more government stimulus."
So the question isn't whether Chinese exports should fall -- obviously when
you raise the value of your currency by 25% the stuff you're selling becomes
more expensive and fewer orders get booked. It's why would economists expect
exports to rise by 8% in the face of a soaring yuan and slowing growth pretty
much everywhere else. See Is
The Whole World Slowing Down?
Or maybe there's a deeper strategy at work. Assume that the leveraged speculating
community which, since it includes the money center banks, employs most of
the high-profile economists whose estimates get quoted by reporters, is desperate
for more easy money to bail out their bad derivatives bets. What better way
to get it than to produce ridiculously optimistic estimates of Chinese growth
which are then "missed" by a mile, leading to panicked calls for more stimulus.
Now it all makes sense.
