So much for the green shoots theory, at least as far as an early Chinese recovery is concerned. From AFP (hat tip reader Michael):
Chinese exports fell 22.6 percent in April from a year earlier in the sixth straight monthly decline, state media said Tuesday,…
Exports from the world’s third-largest economy totalled 91.94 billion dollars last month…
The drop was larger than that recorded in March, despite hopes that China’s exports performance would start to improve.
Commerce ministry spokesman Yao Jian said in April that China was confident exports would improve “on the basis of the gradual recovery seen in the first quarter.”
Exports in March fell by 17.1 percent year-on-year, narrowing from a 25.7 percent dive in February, the worst slump in more than a decade.
The Wall Street Journal’s headline, “China’s Export Decline Steepens But FAI Accelerates,” nevertheless tries to slather lipstick on this pig, although the text is a more evenhanded:
A fragile external outlook as shown by China’s deepening export decline in April may damp hopes accelerating local investment and massive credit growth will drive an early recovery in the world’s third-largest economy.
Chinese exports in April fell 22.6% from a year earlier, and imports fell 23.0%…The decline in exports in April was sharper than March’s 17.1% drop and the median forecast of an 18.4% decline in a Dow Jones Newswires survey of 16 economists. The decline in imports was narrower than March’s 25.1% plunge, but wider than the poll’s median forecast of a 22.0% drop..
Fixed-asset investment in China’s urban areas in the January-April period grew faster than expected, rising 30.5% from a year earlier and accelerating from the first-quarter’s growth rate of 28.6%, the National Bureau of Statistics said Tuesday.
The investment data reflect how Beijing’s stimulus program, which is focused on public infrastructure investments backed by a flood of bank credit, has helped stabilize the economy.
But the Financial Times tells us that the banks in China are putting the brakes on the cheap lending that helped fuel the investment boom, so it would appear some loans were not necessarily going to investments that have good odds of being productive. And even more important, China is experiencing its third month running of deflation, a factoid that hasn’t attracted much notice in the MSM, If it continues, indebtedness and deflation are a toxic mix, and are likely to pave the way for banking sector woes:
Chinese bank lending slowed dramatically in April because of fears that loan growth in the first quarter had been excessive and could pave the way for loans of deteriorating quality, so possibly creating a new round of asset bubbles.
China’s state-dominated banks gave out Rmb591.8bn ($85.2bn, €62.5bn, £56.3bn) in new loans last month, less than a third of the Rmb1,891bn in new loans extended in March, but still well above the monthly levels of recent years.
In the first quarter, Chinese lenders answered the government’s call to open the credit taps and get the economy moving again, extending more than Rmb4,600bn in new loans – more than the entire amount of new lending in 2007.
That led to fears among regulators that money was being funnelled illegally into the stock market and handed out to state-sponsored stimulus projects of dubious commercial value that could become non-performing assets.
Some regulators also worried about the potential for rampant inflation. Those fears were somewhat eased by price measurements released on Monday showing China remained in deflationary territory in April for the third consecutive month.
The consumer price index fell 1.5 per cent from a year earlier in April, compared with a fall of 1.2 per cent in March, while the producer price index fell 6.6 per cent after falling 6.0 per cent in March.
Chinese bank lending is usually strongest in the first quarter and moderates as the year goes on. However, the abnormally steep April drop raises some concerns that China’s nascent economic recovery could flounder without the injection of huge volumes of new loans.
We had noted in February that some experts thought as much as 1/3 of the new loans were going into the stock market rather than fixed investment. Michael Pettis had also reported that some of the loans were sham transactions to meet government targets.
Update 2:30 AM Bloomberg falls into the lipstick-painting camp with its headline: “China’s Investment Surges 30.5%; Exports Decline “