Brad Setser

Follow the Money

Cross border flows, with a bit of macroeconomics

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Minus twenty, minus twenty, minus twenty …

by Brad Setser
May 13, 2009

US non-oil imports in the first quarter: down a bit over 20% when compared to the first quarter of 2008 (-23.1% to be precise)

US exports to Europe in the first quarter: down around 20% y/y (-19.0% to the eurozone, -18.8% to the EU)

US exports to China in the first quarter: down around 20% y/y (-19.8% to be precise)

It isn’t hard to figure out why so many ships are sitting idle in the Straights of Malacca. A contraction in global demand has led to a sharp fall in global trade.

Somehow, the fact that US exports to China are down about as much as US imports from the world — and US exports to Europe — doesn’t come through in most reporting on the trade data (setting Mark Gongloff of the Wall Street Journal aside) And since we know that the sharp fall in US and European imports in the fourth quarter of 2008 and the first quarter of 2009 reflects a sharp fall in US and European GDP in those quarters, it also suggests — at least to me — that China experienced a quite sharp slowdown back then.

A plot of the 12m change in the 3m rolling sum of US imports — including oil — and the 12m change in the rolling 3m sum of Chinese imports looks remarkable similar. In both countries, imports fell off a cliff.

Some of the fall is due to a fall in oil and other commodity prices, and thus a fall in both countries oil and commodity import bill. And in China’s case, some of the fall in imports is tied to the fall in Chinese exports, as China’s exports have a higher imported content than US exports. But those aren’t the only factors at work either: China’s imports from the US (e.g. US exports to China) are also down significantly.

The US and Chinese data on this agree. The Chinese imports from the US are consistently a bit higher than US exports to China, as the Chinese data picks up some goods re-exported from Hong Kong — but the y/y changes are similar.

China doesn’t import that much from the US — so the data on US imports may not be a perfect proxy for economic conditions inside China. Changes in Chinese demand for aircraft may not really reflect changes in Chinese demand. At the same time, the recent pickup in Chinese demand for earth moving machinery may not be perfect proxies for broader conditions inside China either, as Caterpillar benefits more than most from China’s infrastructure focused stimulus. But the data on trade with the US does suggest that Chinese demand — in at least some sectors — fell along side US and European demand last fall. Remember, China’s property and construction sectors were slowing even the Lehman crisis.

All this data is backward looking. Even if China slowed together with the rest of the world in the fall, China’s stimulus — notably the huge increase in bank lending in the first quarter — could starts to pull China up before the rest of the global economy. That should be reflected in the trade data, as a growing Chinese economy should but more from the rest of the world.

There are — to be fair — some green shoots in the data. Using a three monthly rolling sum smooths monthly volatility and thus is slower to pick up changes than the monthly data. And the monthly data does suggest that Chinese demand for the world’s goods is starting to pick up. The y/y fall in US exports to China in March was smaller than the y/y fall in January and February. And China’s April data showed a smaller y/y fall in imports (though not exports).

Turns are important, no doubt.

But so are starting points.

The trade data for the fourth quarter of 2008 and first quarter of 2009 suggests — at least to me — that China’s economy moved down in parallel with the rest of the global economy. China wasn’t an engine of demand growth then, nor was it a source of support for US exports. Let’s hope that changes.

On to the April Chinese trade data.


  • Posted by guest

    It seems to be called tautology? at least they should be equal

  • Posted by Peter


    I have been wondering what the effect would be if you strip out the earthquake-GDP, It has to have given the numbers a huge boost, be good to know what magnitude. Do you think the devastating earthquake could have jump-started China’s transition from exports to domestic consumption? (China exports less and consume more of what they produce)

    You have one of the most insightful blog, thanks for sharing your thoughts.


  • Posted by bsetser

    guest — actually, there is no reason why the fall in US exports should be the same as the fall in US imports. Exports are a reflection of global demand for US goods. Imports are a reflection of US demand for US and global goods. the fact that the fall is so similar is actually a bit strange — it highlights just how synchronized the downturn has been.

    remember, back in 07/ the first part of 08, US non-oil imports were flat and US exports were growing quite strongly.

    peter — my guess is that the earthquake hasn’t had much impact on the data. the downturn in china’s coastal property market likely mattered far more. just a guess tho

  • Posted by Thomas


    Sichuan accounts for less than 5 % of China’s GDP (Sichuan has lots of people, but low GDP/capita). So even massive rebuilding efforts shouldn’t affect the nationwide total all that much.

  • Posted by Uncle Billy, Mental Widget


    Do you know of any good resource for reliable employment numbers/estimates in China or Hong Kong?

  • Posted by Howard Richman


    I’m impressed. You saw through the phony Chinese data! The import and export statistics are just about the only Chinese data that can be relied upon.

    If you want a handle on on how fast China’s GDP is shrinking (not growing), there is no better indicator than their falling import numbers.

    And yet, IMF and several other organizations just came out with estimates that China will grow between 6.5% and 8.3% this year. They should know better than to allow themselves to be suckered by phony Chinese government statistics.


  • Posted by bsetser

    Howard — note that China’s april import data was a bit better.

    china on one hand stands out as the only big exporter that hasn’t experienced a sharp contraction, tho that in part reflects the absence of chinese auto exports and thus its insulation from the huge fall in auto demand.
    on the other hand, it had a very liquid banking system that wasn’t overextended and could increase lending rapidly. figuring out how those balance going forward will be a challenge. The data I presented look backward not forward, and they suggests a very sharp contraction for china in q4. that doesn’t tell us tho what is happening in q2 — that is the much harder call.

  • Posted by Cedric Regula

    My mini-barometer, The Port of Long Beach container count, posts data that comes out sooner than official trade totals. April is out and here’s the monthly count so far.

    The first number is incoming, the second outgoing.

    February 149,299 92,781
    March 186,450 117,674
    April 199,051 112,976

    So there is some improvement month to month for incoming, but the year to date is still running close to minus 30% vs a year ago for both imports and exports.

    Sort of makes you wonder where China is shipping all those exports?

    My new micro indicator since moving to AZ is the railroad tracks I cross on the way to the golf course. I used to be able to read the containers in Long Beach for the last thirty years and they said Japan, Korea, Taiwan, various Asian Tigers, then finally China in chronological order. Indian programmers used airports, so this method was ineffective for tracking them.

    But now I have to read the containers as they pass by on the railroad tracks. Last year a huge number of China containers would go by. Now I hardly notice many at all.

    Not an extremely scientific and statistically significant indicator, I’ll admit, but it’s something.

  • Posted by Twofish

    Billy: Do you know of any good resource for reliable employment numbers/estimates in China or Hong Kong?

    The references in this article is probably the closest thing that you will get for the PRC…

    The problem is that in the Chinese economic system its really hard to figure out who is “employed” and who is not. For example, if you have a peasant worker in a factory, they are technically employed as a farmer, and just happen to be in the factory doing factory work.

    Conversely, it’s very common for state owned enterprises to cut someone’s salary and list them as a worker, even though they aren’t getting money or doing anything.

  • Posted by djc

    Western Economists still overestimate the US Economy’s impact on China. While the labor intensive textile and toy factories across the Pearl River Delta have been hard hit, the structure of the Chinese economy is rapidly evolving towards higher value added products.

    China now leads the world in ‘high-tech exports’ ($US 271 billion), with the US running second ($US 219 billion) and Germany third ($US 155 billion). (IMD World Competitiveness Yearbook 2008, p. 438).

    In the not so distant future, while per capita income will likely never catch up to the West due to its billion plus population, China will soon regain its historic economic position as the World Largest Economy from 1200-1900 AD.

  • Posted by Uncle Billy, Mental Widget

    Twofish: Thankyou — he focuses in on the migrant workers which is informative, and notes a few times that he doesn’t think they will take to the streets. I was thinking that there might be some central registry for their unemployed. Maybe as the rfid cards become more widely used they will begin to track this (though I imagine the rest of the world would get a very distorted view of true levels of employment). Does anyone know if Hong Kong has been hit as hard as Manhattan, labor-wise?

  • Posted by purple

    One can also look at Japan’s export data to China.

  • Posted by purple

    In the not so distant future, while per capita income will likely never catch up to the West due to its billion plus population, China will soon regain its historic economic position as the World Largest Economy from 1200-1900 AD.

    China should worry about getting its per-cap GDP (PPP) significantly higher than heavyweights like Angola and Egypt before it worries about the West.

    Growing inequality between the coastal and interior regions (where few Westerners go) is a very real threat to the central government’s authority – as it has been throughout history.

  • Posted by DOR

    Uncle Bill, Mental Widget,

    Hong Kong’s labor data are here (, but they won’t tell you much about what’s happening in other parts of China.

    = = = = =

    Howard Richman,
    Chinese imports are an excellent indicator of what’s happening with Chinese exports. That’s about all, really. Not a good indicator of the domestic economy at all.

    = = = = =

    -21.3% in Dec, (Jan: CNY seasonality), -23.2% in Feb, -24.9% in Mar, -22.8% in Apr: Within the margin of error, there has been no improvement in China’s imports, just month after month of the same thing.

    = = = = =

    Cedric Regula,

    As usual, China is shipping all those exports to Asia and Europe.
    Percent Share of China’s Exports
    – – – – – – – – To Asia – – To Europe – – To USA
    Q1 2008 – – – 48.9% – – – 24.3% – – – – – 18.9%
    Q1 2009 – – – 48.7% – – – 22.7% – – – – – 20.2%

    = = = = =


    The problem with China-Japan trade data is that each side claims the other is running a large surplus.