Consistent with expectations that a weakening US economy will cause a decline in China’s trade surplus, the latest PMI figures show the new export orders index down by 1.5% for October. Confounding those expectations, however, the new import orders index was down even more – it declined by 2.1%.
In an October 23 entry (“A slowing US won’t fix China’s trade imbalance”) I suggested that if it is China’s monetary policy that is driving the trade surplus, rather than “excess” US consumption, a slowdown in the US economy would not necessarily result in a reduction in China’s trade surplus since this was driven by the excess of production over consumption, and this excess was largely a function of China’s monetary policy (or lack thereof). One month’s numbers don’t prove anything, of course, but if this is true we would expect any slowdown or decline in exports to be matched by an equivalent decline in imports. So far that looks like it may be happening.
I need to think this through a bit more, but I guess that if US demand does fall, we would either see lower Chinese export prices, so that Chinese exports would displace those of other developing countries, or either a decline in import demand caused by lower consumption or a buildup of inventory; medications celebrex.
By the way a recent research piece by Credit Suisse claims that from the beginning of 2001 to the beginning of 2005 medications celebrex, the RMB depreciated in real trade-adjusted terms by about 16%. After that it began to appreciate in fits and starts by about 8% by early this summer before giving back about 3%.
On a separate topic