The Chinese General Administration of Customs reported a decline in both exports from and imports to China in June. Exports fell 3.1% from last year, the single largest drop since the Great Recession. The decline in trade shows how vulnerable the export-driven Chinese economy is to foreign recessions, and helps underscore the slowdown seen in the world’s second largest economy.
Presently, China Industrial Production (our benchmark for the overall economy) is growing at 9.5% (officially), the slowest pace in over three and a half years. The latest trade data will test the resolve of Premier Li Keqiang as he attempts to restrain credit growth and cut back the government’s role in the economy.
One should be careful about reading too much into the lower trade figures. Fake invoices over-reported trade data in the first four months of 2013, a practice the Chinese government is moving to curb. However, it is clear that tepid economic activity in Europe, combined with slower growth in the United States, is having a dampening effect on China.