Jake's View

Export forecasts call for finger-crossing

PUBLISHED : Sunday, 27 April, 2014, 5:19am
UPDATED : Sunday, 27 April, 2014, 5:19am

[Ministry of Commerce representative Shen Danyang] told a press briefing that the ministry remains "fully confident" that exports and imports would meet the government's annual target of a 7.5 per cent growth this year. "The trade situation will recover in the second quarter" likely starting in May, Shen said.

SCMP, April 18

I wonder sometimes if these Beijing bureaucrats don't have their fingers crossed behind their backs when they pronounce themselves so confident in their forecasts.

They like to make you think that export performance is just a matter of fine-tuning the instruments in the control room of the economy. Flick a switch here, turn a knob there, then hit the <Enter> button and the dial will show the needle rising back up in May towards the prescribed 7.5 per cent.

Do they really believe it themselves?

Let's look at the larger picture. The first chart shows you on one line the combined import growth rate of Europe and the United States and the other line the combined export growth rate of all of East Asia (well, not quite. I haven't included Laos, Cambodia and North Korea).

You need not really bother figuring out which is which here. They are the same, which should hardly be a surprise. Every piece of merchandise bought is also a piece of merchandise sold, and we have the bulk of both sides of the market in the chart.

This leaves us with a question. Which drives which? Does the exporter say to the importer, "Hey, you, yeah you, I'm talking to you. Buy from me if you don't want to land yourself in trouble" or does importer tell the exporter, "I would like to buy, please. Can you sell?"

Right, well, we've settled that question, I think, which can only leave us to wonder how it comes about that European and American importers have privately told Shen that they will pile on the orders again, starting in May, when they have told no one else.

If they have indeed done so, then he is entirely right to be "fully confident" and pronounce with authority that "the situation will recover". Alternatively …

And now the second chart. Here we have China's export growth in the red line and the rest of Asia's in the blue line. What it says is that China has long outpaced its Asian competitors, both on the ups and on the downs, and is still doing so, but perhaps by not as great a margin as before.

The question for Shen then is not whether exports will hit their targeted 7.5 number. Neither he nor any compatriots active in foreign trade have any direct control over this. China's export growth will rise again when European and American consumers become more confident again.

The question is rather whether China's exporters will retain the enormous competitive advantage they have enjoyed for so many years over other Asian producers.

And my own reading of the most recent trends in that second chart suggests that possibly it will not, that China cannot expect much longer to take an ever larger market share.

Cross your fingers when you speak now, Mr Shen.