China Commodity Imports Must Do Better than Hold Up

China’s imports of major commodities are holding up well, according to market consensus, but that in itself is quite concerning for the overall state of the world’s second-biggest economy.

Commodities are often viewed as the canary in the coal mine, with falling demand a sign of economic troubles ahead. Likewise, consumption of natural resources should pick up ahead of a more general recovery.

The fact commodity imports haven’t weakened does allow some of the more alarmist views of China’s economy to be discounted.

But equally, the absence of a resurgence in imports means any significant, infrastructure-led recovery is not yet on the horizon, even if it is coming, as is the widely-held conviction.

“July commodity imports held up,” was how Barclays headlined a report on China’s trade data, while London-based consultancy Capital Economics said, “Commodity imports hold up well.”

These were just two of several reports that struck similar notes, although many analysts also questioned whether those commodities exhibiting strength in imports are doing so because of underlying demand in China, or for other reasons.

Crude oil imports, for instance, rose to 30.71 million tonnes in July, a gain of 4.1 percent on the prior month and 29.3 percent higher than in the same month a year ago.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza