CHINA'S EXPORT DECLINE STABILIZING IN

UNCLAS SECTION 01 OF 02 BEIJING 001297

SENSITIVE
SIPDIS

STATE FOR EAP/CM SHAWN FLATT, EEB/TPP ERIK
MAGDANZ, EEB/TPP ELIZA KOCH, E HUGO YON
STATE PASS USTR FOR TIM STRATFORD, AUDREY WINTER,
ANN MAIN, ERIC ALTBACH
DOC FOR IRA KASOFF/NICOLLE MELCHER (5130) FCS (3132)
TREASURY FOR OASIA/ROBERT DOHNER
NSC FOR JIM LOI

E.O. 12958: N/A
TAGS: ETRD ECON EIND EMIN CH
SUBJECT: CHINA'S EXPORT DECLINE STABILIZING IN
APRIL, IMPORTS UP, SURPLUS LOWER


1. (SBU) SUMMARY. China's General Administration of
Customs May 12 reported a 22.8 percent drop in
China's overall foreign trade to $170.7 billion
versus the prior year, the sixth straight monthly
decline in China's overseas trade flows. While on a
year-on-year basis exports dropped by 22.6 percent
to $91.9 billion and imports fell 23.0 percent to
$78.8 billion, exports were almost flat from the
previous month, and imports increased around 7
percent over March. After a surge in the trade
surplus in March, China's global trade surplus in
April dipped to $13.1 billion, partly due to rising
raw material imports. The export decline is slowing,
while the rise in imports seems due more to raw
materials purchases than consumer demand. End
Summary.

MOFCOM's Chen Deming Spins the Stats


2. (SBU) During his visit to Washington April 27,
Minister of Commerce Chen Deming offered a positive
preview of April's trade data: "I have some good
news," he said, "in the first 20 days of April, we
have witnessed a slowdown in the decline of our
foreign trade." In absolute terms and on a month-
to-month basis, his assessment
was correct: April's export levels ofQ91.9 billion
slightly bested March exports of $90.3 billion, and
AprilQmports of $78.8 billion also exceeded March
imports of $71.1 billion. China Customs emphasized
this monthly increase by, for the first time,
releasing month-on-month unadjusted trade figures.

China's Export Decline Slows


3. (SBU) While the unadjusted figures overstate the
improvement in China's exports, most analysts agree
that the decline in exports appears to have
stabilized. Adjusted for China's first quarter
seasonal effects -- including effects of the Chinese
New Year holiday and the usual post-Christmas dip in
exportQ-- Helen Qiao at Goldman Sachs Group
estimates that exports fell about 1.3 percent over
March, with JP Morgan's Qian Li Wang estimating the
fall at 2.8 percent. While this is certainly a
decline, the speed of the drop appears to have
modulated.


4. (SBU) That said, many observers still found
April's export figures disappointing. The important
category of mechanical and electrical exports was
down slightly, and after posting impressive monthly
gains in April low-end consumer goods exports
contracted almost 10 percent over March. Steel also
performed poorly, down over 22 percent month on
month, adjusted. High-tech exports were the only
bright spot.


5. (SBU) By destination, exports to ASEAN, Taiwan,
Korea, and the United States showed stability. On
the other hand, exports to the Euro area and Japan
remain weak.

China's Imports Stronger


6. (SBU) On a seasonally adjusted basis, Qiao and
Wang estimate that imports grew roughly 6 - 7
percent
over March. In part this reflected a stabilization
in international commodity prices, as well as
initial signs of recovering Chinese demand.


7. (SBU) By source country, imports from Korea,
Taiwan, and ASEAN recovered ground, although these
imports had also fallen the most in the previous
months. Imports from the EU were up slightly on a
month-on-month basis, and appear to have taken

BEIJING 00001297 002 OF 002


market share from the United States. Adjusted U.S.
imports appear to have improved slightly over March,
but at a much slower rate than China's other trading
partners.

COMMENT: Year-on-Year versus Month-on-Month


8. (SBU) Overall, the Chinese year-on-year trade
data gives credence to anecdotal reports of "new
mountain ranges" of 200,000 empty ocean containers
building in Shanghai and other ports elsewhere in
China. Reviewing January - April 2009 as a whole,
China's General Administration of Customs reported
China's exports were down by 20.5 percent year-on-
year in the first four months to $337.42 billion and
imports were off by 28.7 percent to $261.99 billion.
Likewise, hopes by China's trading partners for a
major rise in consumer demand-driven imports
resulting from domestic stimulus spending have not
yet been borne out, although the much-discussed
"green shoots" may be evident.

PICCUTA