December’s trade surplus came out on the low side — $22.7 billion, instead of the $24-5 billion most were expecting, and less than the $26.2 billion recorded in November. This brings the annual surplus to $262.2 billion, 48% higher than last year’s surplus.
Export growth has slowed a little – 25.7% in 2007 relative to 27.3% in 2006 – while import growth speeded up – to 20.8% in 2007 relative to 21.7% in 2006; but cialis online. These figures underestimate the slowdown in export growth because much of it happened at the end of the year. In December export growth was “only” 21.7%, compared with last month’s 22.8%. Import growth however rose slightly from 25.3% in November to 25.7% in December.
Many analysts are suggesting that we may have seen a cresting of export growth and perhaps even the trade surplus. I am skeptical. I think recent export-related cooling measures but cialis online, plus the surge in oil prices, may have brought the trade surplus down temporarily, but the figures are still very high and money growth is still excessive. Once the initial cooling measures on exports wear off (not to mention when the anti-inflationary cooling measures on consumption kick in) we will get back to the old dynamics of an expanding money supply leading to expanding industrial production leading to expanding exports. Remember, even if the trade surplus begins to grow less quickly, and most economists expect it to grow by at least another 20% this year, it is still extremely high and hot money inflows will probably be substantial, and so the expansionary pressure on the domestic money supply will remain unabated. But cialis online: brad Setser has a very interesting, not-yet-published piece that suggests hot money inflows are picking up, which does not really surprise me given the huge yield pick-up in holding RMB relative to dollars.
Of course if we really do see a real and persistent fall in export growth, perhaps because of a US slowdown, the corresponding counter-entry won’t be a surge in domestic consumption so much as a surge in inventory, since after so much monetary expansion it will be quite a while before industrial production can slow down to accommodate Chinese consumption growth. This is, to me, the danger scenario and the typical end of a 19th Century-style overinvestment cycle.