Mainland performance improves on inspection
Our story on the September trade figures from the mainland certainly conveyed foreboding. 'Exports in 6.7 per cent dive', the headline read and the usual crop of analysts were quoted as saying that it was very bad indeed.
It is not that bad at all, however, when a few things are taken into consideration.
Start with the golden rule that one should avoid looking at monthly trade growth figures in raw form. If it's been said once it's been said a thousand times in this column. These trade figures go up and down like the recording needle of a seismograph in an earthquake. Smooth them out with a six-month moving average if you want to see the trend.
This shows that, yes indeed, the mainland's export growth is declining. It still shows a positive number on this basis but it won't last long.
However, things are much worse for the rest of Asia. Complete figures from all other countries in the region are available only up to June but already at that time they showed a 5.5 per cent decline in export growth on a six-month average basis. There is nothing to indicate that the trend has changed since that time and so the figures for September will probably show about a 10 per cent decline.
In other words, the mainland stands out as one of the best performing countries of the region in foreign trade. Although not impervious to the general slowdown, and no-one could expect that it would be, it has resisted the trend very strongly.
But there is another way of looking at it. While many people are predicting that deflation (a general fall in prices) will soon be upon us in the consumer price index, it is already upon us in many countries in export and import prices.
The mainland does not itself publish indices of export and import prices but much of its trade is funnelled through Hong Kong and Hong Kong does have price index figures on this trade.
They show that the average unit price of imports from the mainland was declining by 2 per cent on a six month average basis in June, the latest month for which figures are available. Given the rate of decline at that time, the figure will probably be nearer 4 per cent for September. Re-exports to the mainland showed a year on year price decline of 3.6 per cent in June.
This argues that while the value of exports may be declining, the volume of exports is not dropping by as much.
Even more to the point, if the trend in prices of re-exports to the mainland is any indication of the prices of goods the mainland imports, then mainland manufacturers are in the enviable position of seeing a growing positive margin between their cost of goods and the prices the world is willing to pay for them.
This is perhaps a case of trying to draw more out of the figures than they are really able to yield but the basics of the trade picture are clear enough. The mainland is doing much better than the rest of Asia and a rising proportion of the decline in the export figures is attributable to the world-wide trade deflation rather than falling export volumes.