China Takes Global Export Lead

We learned early last week that China had surpassed Japan to become the world’s second largest exporter with only the industrial might of Germany still managing to out-produce Asia’s largest economy. Displacing Japan is a rather remarkable achievement actually given the state of the global economy this past year and the fact that China – relatively speaking at least – is new to the world stage when compared to both Japan and Germany. So how did China celebrate this achievement? Merely by knocking off Germany to become the world’s number one exporter less than a week later.

Latest figures from Chinese authorities indicate that for December, exports increased 17.7 percent from the previous year bringing the total value of the year’s exports to US$1.2 trillion. This represents the first monthly increase in exports in fourteen months and suggests that the global downturn may be abating as demand is once again on the rise for China’s products. However, the number that really caught my interest was the whopping 55.9 percent increase in China’s imports in December.

In fact, December 2009 was a record month for imports with China marking a strong increase in oil, iron ore, copper, and soybeans. Crude oil was the largest single commodity imported and for the first time, exceeded more than five million barrels a day for the entire month. Clearly, demand for fuel – presumable to power China’s major building projects and the 13.6 million new cars added to China’s roads last year – is on the increase. Or so you would think. In fact, for 2009 and for the first time in almost two decades, China actually sold more refined fuel abroad, than it used in its domestic market.

Certainly, the idea of China becoming a net exporter of fuel does cause one to question the true demand for gasoline and diesel within China – and by extension – the level of recovery currently underway. We shall be watching this trend very closely.

Despite the question over fuel usage, an increase in both exports and imports suggests that global trade is increasing and this is the surest sign yet that the global economy is shaking itself free from the recession. We still have a long way to go of course, and some jurisdictions have more work to do than others, but China’s latest trade results are the most positive indicator we have seen in many months.

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