China’s external trade declined sharply over 2015, and is on track to miss the government’s 6% full-year growth target, with combined exports and imports down 8.5% in USD terms through October. Yet a closer look at the data shows these changes were primarily a byproduct of price adjustments, including exchange rate changes: volume declines were more limited. The shift is meaningful, but the weakness more concerns the financial conditions of exporters, rather than drag in the Chinese economy itself. In addition, there have been significant regional shifts in Chinese trade balances, with the emergence of a secular Chinese trade surplus with the rest of Asia, coinciding with China’s deflationary adjustment.
