Data Update: Trade Data Improves, Shows Limited Upside for Yuan Devaluation Policy

Trade data came in better than expectations, and is further evidence that growth momentum picked up into the end of 2015.  A weaker yuan might have helped contribute to the better numbers after declining around 4% vs. both the USD and JPY.  But, the yuan is still almost 8% higher against the EUR, China’s largest trading partner currency, so a weaker yuan has probably only contributed a modest improvement to the trade data.

China's share of total global exports is still rising, and the trade surplus continues to hit new record highs.  Those two factors leave little reason for an engineered fx devaluation from Beijing meant to make exports more competitive.  Exports are already competitive, and growth stimulus needs to come from domestic tools.  

China's Trade Surplus ($ billion USD)

China Exports as % of Global Exports

All in all, the data supports my view that it is very probable Q4 headline GDP numbers will be better than current expectations when announced next week.

Some key takeaways from China’s December trade data:

  • Trade for processing and exports was much weaker than trade for domestic use.  Exports for processing declined 10% from last year.  That points to weak global trade in general.
  • Key commodity imports by volume increased from last year.  On the year, crude oil imports rose 9%, with copper and iron ore -0.3% and 2% due to declines early in the year.  Commodity demand has increased going into 2016.
  • If we adjust imports for commodity prices moves, we get an adjusted import number of around 2%, weak but positive.
  • Exports to EM economies declined overall, indicating weak demand from those economies, as well as weak growth in the global supply chain. 
  • For more data see: