It’s Not about Commodities Anymore

China’s imports fell by the smallest margin in over a year in May, amidst signs of strengthening domestic demand. Most explanations for China’s rising trade surpluses over the past two years have focused on sharply falling commodity prices. Looking at China’s import components separately, however, reveals a surprising positive growth contribution in value terms from major commodities imports in May, while imports more closely associated with consumer demand have been declining slightly this year.

Processing trade imports, typically re-exported to developed markets, have continued declining structurally as a proportion of trade as external demand softens and a shift away from lower value-added light manufacturing industries is ongoing. The slowdown in China’s imports over the past two years extends well beyond commodity prices, but these price effects will also have less influence on the headline trade data for the rest of the year.

Posted August 1, 2017
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