Chart of the week: which way next for China’s trade surplus? | beyondbrics | FT.com

Chart of the week: which way next for China’s trade surplus?

May 14, 2012 3:28 pm by Rob Minto

 Another month, another alarming statistic from China. This month, amid all the other gloom, came the trade surplus.
It jumped from $5.3bn in March to $18.4bn in April. Not the right direction, certainly. But is there cause for alarm? And what is the long term pattern of China’s trade, anyway? Chart of the week takes a look.
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China’s stated policy aim is to boost its domestic consumption and move away from the export-led growth of the last few decades. This implies a big increase to imports. So the recent April figure was rightly greeted with a bit of a groan.
But if we look at the long-term trend, the picture is quite different. We have chosen to focus on the trade surplus as a percentage of imports (on a 12 month rolling basis to remove seasonal swings).
The chart below shows two lines, the red line (measured on the left axis) shows the trade surplus. The level in April 2012 is near that of April 2007 – $166bn compared to $207bn. ...
 the blue line shows how the trade surplus has fared as proportion of imports. In other words – what do imports need to do to make up ground? And although the pattern of rise and fall is similar, there is a different story. The import shortfall goes from over 20 per cent in 2007, rises to 30 per cent in 2009, but then falls and keeps trending lower. It ends at less than 10 per cent.

In other words, imports have less catching up to do relative to their size. Imports and exports have both grown so that the relative difference is getting smaller.
This is because the economy as a whole is getting much bigger, quickly. Comparing a monthly trade surplus of $20bn four years ago isn’t the same as a trade surplus of $20bn last month. The absolute sum may be the same, but the impact is smaller.
In fact, as a percentage of GDP, China’s trade surplus has gone from around 7.5 per cent in 2007 to just over 2 per cent in 2011.

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Chart of the week: which way next for China’s trade surplus? | beyondbrics | News and views on emerging markets from the Financial Times – FT.com