In November China’s exports declined the most since 1999 and its imports declined the most since they began keeping monthly records:
BEIJING, Dec 10 (Reuters) – China’s exports and imports shrank unexpectedly in November as the world’s fourth-largest economy slowed in a startlingly abrupt way in response to the global credit crunch.
The drop in exports from year-ago levels was the largest since April 1999, while the decline in imports was the steepest since monthly records kept by bankers began in 1993.
Other Asian export power houses, including South Korea and Taiwan, had already reported a drop in shipments last month as the shock to confidence that followed the collapse of Lehman Brothers in mid-September reverberated through the world economy.
Economists had expected China’s exports to rise 15 percent and imports to be up 12 percent compared with November 2007. But the data showed exports fell 2.2 percent from a year earlier and imports dropped by 17.9 percent.
Because Imports shrank so much faster in November than exports it resulted in China running the largest trade surplus ever at $40.1 billion for the month.
To understand the Chinese authorities’ concern about the situation it helps to remember that they believe that China must maintain a growth rate above 6% per year just to avoid civil unrest. China’s exports account for 60% of the growth in the country’s GDP.
China’s trading partners are concerned that China will try to export its way out of its economic problems, exploiting any means necessary to do it. The main concern is that the Chinese will devalue the yuan which most non-Chinese experts believe is already undervalued. Chinese leaders denied this vehemently. Washington on the other hand wants the Chinese to allow their currency to strengthen.
I can’t think of anything more likely to provoke a trade war than a devaluation of the yuan. The new Congress is even less sympathetic to China’s staggering level of exports to us than the previous one has been. If their attention can be distracted from the transition that is.
However, it needs to be pointed out: China’s leadership doesn’t know how to cope with recession any better than ours does. Maybe even less since they’ve never faced one before.
