China trade

Detroit automakers, German industrialists, Japanese electronics makers – in fact, almost any manufacturer you care to mention – would delight at such a modest fall in their order book. China, the world’s favourite factory floor, reported a mere 2.8 per cent year-on-year drop in exports in December.

This undoubtedly understates, or rather lags, the damage. The biggest hint comes from neighbouring countries. Exports from South Korea and Taiwan, the third and fourth biggest exporters to China last year, in December plunged by 17 per cent and 42 per cent respectively. Many of these shipments contain parts which China processes or assembles and then ships on to the rest of the world. If Chinese imports of such components are down by about a third, you can bet a more serious export slump will follow soon. Prices are also falling. Chinese shipment prices to the US fell by 0.6 per cent month-on-month in November, according to US data. Morgan Stanley calculates the Chinese export contraction, measured in local currency, is about 10 per cent.