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There is a lot of fretting in the press this week over China’s October trade statistics. It’s true that the month-on-month growth statistics show a modest decrease. There could be a variety of different factors behind the slowdown, including an appreciating currency and weak demand in the advanced economies.
That said, it’s important to view Chinese trade statistics with a bit of a context. If you take a step back and look at the trade growth over the past few years it’s clear that the dominant trend is a return to normalcy.
The graph below looks at two 23-month periods, measured before and after the financial crisis tanked exports. What’s revealed is that after a tremendous plunge (the hole), Chinese exports have returned to roughly the same growth rate as before the crisis.
The growth trends have also returned to normal in the sense that China’s exports are growing faster than the world average. World merchandise exports grew at 14 percent in 2010, while China’s exports surged ahead by 31 percent.
Now it’s possible that the disappointing trade statistics that have come out recently are an early warning sign of a further slowdown, particularly if Europe, China’s largest export market, goes into a recession. But given what we know at this point, there doesn’t seem to be huge cause for concern as it would be hard to describe the current trend as anything other than normal.