During February, Japanese exports dropped almost 50%. For a nation with a $4.3 billion GDP, that figure is extraordinary. Exports to the US were down 58%.
Japan has been a net exporter to the US for decades. It has to bring in oil and some raw materials, but it economy rests on a foundation of being able to sell its products abroad.
The Chinese central government claims that its GDP will grow 8% this year. It points to its $500 billion stimulus package as one of the reasons, but the data from Japan would suggest that China’s forecasts are too high by a significant amount.
China would like the world’s economists to believe that its economic machine is unlike any other on earth. That would mean that its exports are so attractive that even in a deepening recession demand could not be undermined by much. It also assume that a measly $500 billion is enough money to cause consumer and business spending in a nation with nearly 1.4 billion citizens to overcome a contraction of its manufacturing sector. That is clearly too good to be true.
What if China is misleading the West about its GDP growth prospects? For one thing, budget forecasts in the US and other developed nations should be revised down. If China is in trouble, exports from America to the most populous nation is the world will drop like a stone. That should put further pressure on the US GDP which would almost certain make the revenue assumptions in the current proposed budget too high.
Falling exports from China and Japan should also be a leading indicator of a continuing strong contraction of business and consumer demand in the US. That may point to a larger economic contraction in US GDP in March than many analysts are forecasting.
Either China is being misleading about it prospects, or the rest of the world operates in an incomprehensible economy universe.
Douglas A. McIntyre