Things will get worse before they get better.

Expect China's economy to get worse before it gets a boost from the PBOC's recent easing and the expanded fiscal budget.  China's fixed investment has slowed dramatically, to 9.6% YoY in April.  Credit growth is running at the slowest pace in decades.  The slowdown in credit and investment, as well as the negative import data (see previous trade data post) point to weaker economic activity for some time before the RRR cuts begin to boost growth



It takes roughly 4 months or so before RRR cuts boost activity via credit growth and investment.  This means that we probably have a couple of months of ugly economic data before things start to turn around.

The first RRR cut was in February. Assuming we see more fiscal spending to help with the monetary policy boosts, then it will be Summer before growth picks-up.

Here are what my forecasts show for import demand from select countries for the next three months.  Commodity exporting countries will see terms of trade deteriorate.