Growth Stabilizes in China

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Thumbnail image for f04da234c5db14f558be45.png This article was originally produced for the ChinAfrica magazine. 

Despite continued distortion in trade data evaluation due to the propensity for fraudulent “over-invoicing” in the first half of last year, trade figures surprised analysts by rising in April.

Trade growth focused on the U.S. and EU

Largely as a result of trade with developed markets, both exports and imports increased in April. Exports increased from $170 billion in March to $188 billion in April, a 9-percent year-on-year increase. Imports, on the other hand, experienced 8-percent growth from $162 to $170 billion.

Much of the growth in exports was directed toward developed countries. Exports registered to the United States, for example, jumped 12 percent in April from the previous year, a significant development considering the 11.3-percent decrease year-on-year in February and the 1.2-percent increase in February. An impressive 15.1-percent increase in shipments to the European Union occurred in April, compared to the same period in 2013. Exports to ASEAN, on the other hand, fell to 3.8-percent growth from double-digit growth earlier in the year. Some analysts contend that the lackluster demand in emerging economies suggests that this trade growth does not mean that exports are necessarily en route to recovery.

Prices flatten

The simultaneous decrease of CPI and PPI over April is a sign of weak demand for consumption and investment and slowing economic growth. Food prices, a key contributor to the decrease in consumer and producer prices, increased by only 2.3 percent in April, falling under the 4.1-percent increase in March. The price of pork and fresh vegetables, for example, fell by 7.2 percent and 7.9 percent, respectively. Analysts suggest that there is downward pressure on property prices, and that there will be room for policy intervention, such as cutting the reserve-requirement ratio, if real estate prices continue to fall.

Sign of stabilization in future growth

Some analysts suggest that trade figures will continue to increase in May and that this sustained growth will encourage Chinese policymakers to reverse the recent depreciation of the yuan. Over the first four months of 2014, fixed-asset investment growth had fallen to 17.3 percent, which demonstrates a potential for lower future economic growth, despite the encouraging signs from trade data.

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