China’s exports unexpectedly rose 11.5 percent year over year in dollar terms in March, compared to a 25 percent decline in February. Bloomberg:
The export rebound may suggest China’s economy fared better than expected in the first quarter, with data due Friday expected to show a 6.7 percent expansion for the period. The increase in shipments may indicate more than seasonal factors and could show a pick up in demand, said Iris Pang, a greater China economist at Natixis SA in Hong Kong.
“This is quite encouraging indeed,” she said. Still, it’s too soon to conclude that the worst is over for the nation’s exporters, and “we need more evidence to confirm that the whole manufacturing sector is on track again.”
Meanwhile, Chinese officials continue to insist that this year’s early woes were a temporary correction, with Premier Li Keqiang telling Germany’s foreign minister that the Chinese economy has made substantial improvements over the past few months.
Trusting China’s official numbers, and determining how to weigh them against each other is one of the world’s great challenges. Power use rose 5.6 percent in March, suggesting to some economists that households and services are picking up some of the manufacturing slack. Freight rail volume fell 9.4 percent in the January-March period according to official statistics. An AFP poll found that economists, on average, believe China’s economy slowed to 6.7 percent in the first quarter, and the IMF raised its prediction for 2016 to 6.5 percent growth. Bill Gross, the billionaire bond manager, scoffed at such figures on Twitter, calling estimates of 6 percent or more “investor delusions.”
Deluded or not, investors do indeed seem happy for the moment. China’s stock indices were up overnight (EST) and markets around the world followed suit in the morning. Over the past month, equities around the world have mostly bounced back from their January slump. But it’s still not clear that Chinese regulators have figured out how to address the fundamental weaknesses plaguing China’s economy. How will Beijing wind down debt-ridden assets without causing mass unemployment? What industries will replace manufacturing to provide hundreds of millions of middle class jobs?
It would be one thing if China’s officials were admitting these problems, instead of repeatedly insisting that everything is going just fine. A famous Chinese short story by the author Lu Xun called “The True Story of Ah Q” tells of a man who repeatedly insists on his own superiority despite—and even because of—mounting evidence to the contrary. It’s difficult not to wonder if a sort of Ah Q mentality is clouding the vision of Chinese officials, economists, and investors. Markets have been up lately but, whatever China bulls say, it’s not clear that the big picture has improved. Capital has been fleeing the country at ever-faster rates and Xi himself has been battening down the hatches, suggesting that he, at least, sees a storm on the horizon.
China’s slowdown isn’t good for the world, and it’s certainly not something anyone should be cheering. But it’s far too early to assume the worst is over for China or the world economy.