A year ago I marveled at the sheer size of China’s reserve growth. China was adding to its stockpile of foreign exchange at rates that seemed almost unbelievable. That is no longer the case. But in other ways China continues to churn out the kind of data that I never expected to see.
I never, for example, though a country where investment is growing by more than 30% — Andrew Batson reports “Fixed-asset investment, China’s main measure of capital spending, rose 38.7% in May and is up 32.9% for the year so far” — would be spending 25% less on imports. Batson again:
“Merchandise exports in May fell 26.4% from a year earlier, China’s Customs agency said Thursday, accelerating from April’s 22.6% decline as global demand remained weak. China’s imports also extended their fall, dropping 25.2% in May from a year earlier after shrinking 23% in April.”
Investment booms fueled by a surge in domestic lending usually lead to import booms. That was the case with the Asian tigers in the 1990s, the US at the peak of its dot home bubble and the real estate boom in the oil exporters just prior to the crisis. It was also the case in 2003, when a surge in bank lending triggered a surge in investment in China (just as Chinese exports were also surging). But it isn’t the case, at least so far, in China today.
Obviously the data has been shaped by the large fall in commodity prices, which pushes the value of China’s imports down in any y/y comparison. Real exports are certainly down more year over year than real imports.