China trade figures fall

Falling rates in container shipping and air freight are in part driven by growing supply, however demand is also playing a role. Economic numbers from China suggest a marked falls in trade volumes between China and the West.

The latest trade statistics from China’s Customs Administration show falling exports and imports over the past month, with total exports falling by 12.4% year-on-year and imports down by 6.8%. Demand is also flat on a monthly basis, with combined imports and exports down 0.3%.

The fall in exports is probably explained by weaker demand in western markets. Certainly, other figures published by the Chinese Customs portray a particularly sharp fall in exports to the US, which as the largest single destination for Chinese exports would alone explain much of the overall fall.

In contrast, markets which might be called ‘non-western’, such as India and economies in South America, have seen rises in the volumes of exports. A particularly extreme example is a leap in exports to Russia, although this might not be explained by conventional economic forces.

It is also worth noting that imports into China have also fallen. In the past this might be explained by lower demand for components supporting export orientated assembly operations. However, it is tempting to suggest that the fall reflects the real condition of the Chinese economy. The country has experienced a degree of financial crisis as lending institutions have suffered due to a fall in demand for residential building. It is difficult to know to what degree this has depressed both consumer demand and industrial investment, however the latter has also been affected by Beijing’s attempt to avoid investment in poor quality infrastructure projects.

The fall in demand in western markets might be explained by inflation and higher interest rates, however the role of both inventory levels but also a shift in consumer spending away from manufacturers and towards services is likely to be playing a part.

Overall, these numbers illustrate that underlying demand for container shipping in particular is not strong. An argument for continuing price weakness in the sector looks logical, at least in the short-term.

Source: Ti Insights

Author: Thomas Cullen

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