Chinese Exports Drop by 25.7%.

Need an empty shipping container?

If China has less of a trade surplus, it will have less cash to save and invest in US bonds and other financial instruments. An increase in US savings, already up to 5%, or $600bn on an annual basis, is a good long term trend but rough on an economy that is geared to consume. That is $3 trillion in five years.

China is aggressively using government spending to improve her transportation network. 

The Chinese government is spending up to 40% of its GDP on infrastructure. That is wise for future commerce and growth and so far offsets the decline in exports.

The Obama Administration is missing an opportunity by its total lack of focus in government spending. Imagine the outcome if $800bn were invested in real clean energy that is proven and that is nuclear energy.

____________________

China hit by massive drop in exports
By Geoff Dyer in Beijing Financial Times
Published: March 11 2009 03:30 | Last updated: March 11 2009 05:27

Chinese exports slumped 25.7 per cent in February, much higher than analysts had expected, as the global economic crisis began to take its full toll on the country’s export sector.

However, the government also announced a strong increase in fixed asset investment in the first two months of the year, which economists said was a sign that fiscal stimulus measures were starting to have an impact.

China’s exports have decreased for four months in a row, but until February the rate of decline had been much slower than seen in other Asian countries with large export sectors.

The headline figure for last month probably masks an even steeper decline given that there were a shorter number of working days in February 2008 because the Chinese new year holiday fell during that month. Given the timing of the holiday, analysts had forecast only a modest drop in exports last month and were surprised by the size of the drop. Imports continued to decline sharply, falling by 24.1 per cent in February.

The trade surplus, which has been at record levels for the last four months, also shrank sharply from $39.1bn to $4.84bn. This might come as a relief to Chinese policy-makers preparing for the G20 summit next month who had feared that high trade surpluses would increase the pressure on China to appreciate its currency, however it will also increase the domestic pressure on the government for a weaker renminbi.

In his speech last week to the National People’s Congress, Premier Wen Jiabao said that the Chinese exchange rate would remain “basically stable”.

Chen Deming, China’s commerce minister, said that China would reduce export taxes to zero and give more financial support to exporters. China would ”use all possible measures to ensure the stable growth of our exports and prevent a large drop in external demand”, he said in an interview published by a Communist party newspaper.

Despite the weak trade numbers, analysts were also surprised by the rapid rate of increase in fixed asset investment, which rose 26.5 per cent in January and February, up from a growth rate of 21.9 per cent in December. “The rebound is coming much more quickly than we had expected,” said Yu Song, economist at Goldman Sachs in Hong Kong.

Within those figures, transportation investment – one of the priorities of the fiscal stimulus plan – rose 210 per cent over the same period the year before, while property investment was up only 1 per cent, a sign of the continued weakness in the housing market.