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China Export Fall Knocks Global Stock Markets - Because Of What It Says About The Global Economy

Chinas export numbers for September are out and they show a fall of 10% in year on year numbers. This has caused global stock markets to stumble even if not crumble as a result. The point isnt that this means that the Chinese economy is slo

China’s export numbers for September are out and they show a fall of 10% in year on year numbers. This has caused global stock markets to stumble even if not crumble as a result. The point isn’t that this means that the Chinese economy is slowing down and thus we’re all going to be poorer. Rather, it’s because the China export numbers are a reflection of demand in the global economy and if that’s weak then the global economy is weak. What makes this worse is that this fall in value is not as a result of changes in prices, as it has been in some such import and export numbers. No, this is a fall in volumes of goods being shipped which really is a slow down, one that we’re not happy about.

The numbers:

Weak Chinese trade data rippled across financial markets Thursday, sending stocks around the globe sharply lower.

Official data released Thursday showed Chinese exports fell 10% year-over-year last month, sparking concerns about the world’s second-largest economy and global demand.

 

It’s that second which is very much more important. The difference of $20 billion or so’s worth of exports to the Chinese economy is not what is worrying people. It’s that there’s $20 billion less demand for Chinese exports which is.

The 10% year-over-year drop marks the sixth consecutive monthly decline and follows a 2.8% fall in August, the General Administration of Customs said on Thursday. The drop was also markedly worse than a median forecast of a 3.2% decline from 16 economists polled by The Wall Street Journal.

Imports, meanwhile, fell 1.9% in September from a year earlier, reversing a 1.5% increase in August. The import data were also weaker than expected.

The import data is a little different here. Volumes of at least two items, oil and iron ore, are up while their prices have declined significantly. Sure, this is all very sketchy but we might take that as a signal that there’s not much wrong with internal Chinese demand. The export numbers are, again, a reflection of global demand, not Chinese economic problems. Further to this:

The global economic recovery was sluggish, and overseas demand remained low, said Huang Songping, spokesperson for China customs, announcing the data on Wednesday.
Machinery and electronic equipment, two items that together accounted for over half of the total export earnings in September, saw overseas sales shrink by 10% year-on-year.

We just want to buy less of their stuff. And thus the falling stock markets–the assumption is that it is our demand which is weak and that doesn’t reflect well on our economies. The stock market falls aren’t concerns about the Chinese economy. They’re concerns about how much what is happening there reflects what is happening to our own economies.

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