Exports in China are continuing to decline, with a 1.4% slump in December following a 6.8% fall in November.
This reading, however, beat most analysts’ expectations, with the general consensus calling an 8% drop. Imports also beat expectations, falling by 7.6% rather than the 11% widely predicted.
The smaller-than-expected slump, while feeding into the pattern of continual slowdown in China, suggests that the government’s devaluation of the yuan is having some impact on exports. Bloomberg’s chief Asia economist Tom Orlik has suggested that the weaker yuan helps project “a positive for 2016 outlook”.
The common view is that despite the stock market turmoil and various interventions in the currency markets, China’s slowdown is being managed: it is a restructure, rather than the chaos often depicted in mainstream media.
“China’s trade data for December support our view that, despite the turmoil in Chinese financial markets, there has not been a major deterioration in its economy in recent months. Meanwhile, another large trade surplus last month provides a cushion for the People’s Bank in the face of soaring capital outflows,” says Daniel Martin, Senior Asian Economist at Capital Economics.
The hype around the stock market events has surprised many long-term China watchers due to the relatively fledgling nature of China’s stock markets, but also due to the fact that the changes being witnessed have been known to many for a long time: the message from many is that this is nothing new.
“It’s important to remember that the Chinese stock market isn’t necessarily reflective of the health of the broader economy, as many of its largest enterprises remain in state hands and the majority trading on the stock market are individual investors,” says Fang Jian, managing partner of Linklaters in China.
“This is a fundamental difference between the China and western economies. China’s lower growth rate is indicative of the structural readjustment occurring in the economy as it becomes more domestic-driven and less reliant on exports. The overwhelming policy objective at this point is maintaining stability and supporting sustainable growth.”
Euler Hermes expects GDP to grow at 6.5% this year, but highlights the construction, commodity and low-end manufacturing sectors as those to provide the most volatility in 2016.