“Chinese exports tumbled 6.6% on year in March, which represented an improvement from an 18.1% plunge in February, although consensus was for growth of 4%. Imports slumped 11.3% after climbing 10.1% and missed expectations of +2.4%, with the decline partly due to falling commodity prices.”

China Export Imports



Growth in China has slowed significantly.

“Chinese steel consumption declined 6.1% YoY in January, first meaningful decline in 2 years and stockpiles of iron ore at Chinese ports have risen 23% YTD to record-high levels. Daily coal consumption at Chinese independent power producers down 18% YoY. Inventory days have risen 16% YoY. Real estate transaction volumes in China have fallen 30% YTD with declines across 22 of the 24 cities that have available data.”


Part of the slowdown is intended by China’s policymakers but recent data shows that the Chinese economy is clearly off to a slower start to the year.

“We believe weaker-than-expected external demand, tight monetary policy stance in 4Q2013 and heightened anti-corruption initiatives contributed to the economic weakness. We are getting close to further policy loosening.” (Goldman Sachs)

Charts on the Chinese Economy:


China (1)

China GDP Forcasts:

China GDP Forcasts

China & Commodities

Chinese data were all weaker than expected. Chinese retail sales increased by 11.8% Y/Y vs exp 13.5%, urban investments 17.9% vs exp 19.4%, and industrial production climbed 8.6% vs exp 9.5%. Perhaps it is the result of the Lunar New Year holiday but again the signs are indicating that the risks to GDP growth in China are tilting to the downside.

“We believe Chinese economy may well have already reached its trough this year, though 2Q growth may remain on weak side. We think there is likely to be a more meaningful sequential rebound in the second half of the year on the back of potential pick-up in global growth and policy initiatives. New pattern emerging in Chinese economy in recent years with sequential growth often reaching trough in April-July, then recovering in second half of year before it fades again” (Goldman Sachs)


“Dr Copper with a Ph.D. in Economics: Market lingo for the base metal that is reputed to have a Ph.D. in economics because of its ability to predict turning points in the global economy. Because of copper’s widespread applications in most sectors of the economy – from homes and factories, to electronics and power generation and transmission – demand for copper is often viewed as a reliable leading indicator of economic health. This demand is reflected in the market price of copper. Generally, rising copper prices suggest strong copper demand and hence a growing global economy, while declining copper prices may indicate sluggish demand and an imminent economic slowdown.” (Investopedia)

Copper and iron ore are heavily used in China as collateral on loans. At the moment, and under the circumstances, it is probably difficult to gauge how much of the selloff is due to falling growth expectations and how much due to unwinding of carry trades (corporate bond market default).


January 21, 2014:

“We believe commodities with greatest downside over next 12 months are iron ore (-21%) and copper (-15%). We expect 2014 to mark the transition to a structural surplus in the iron ore market and the closure of marginal capacity in China and among seaborne producers. In copper, the “bottom up” supply and demand balance continues to point to a surplus market in 2014 and 2015, on the back of strong supply growth following a decade of strong copper mining capital investment.” (Goldman Sachs)

Topping the list of Global Macro concerns, China/EM credit. Fear of asset bubbles from easy monetary policy and secular stagnation or prolonged low growth.

Global Macro Risk

An overview of the countries with the largest exposure to China.

Exposure to China