Chinese Imports Crumble Again in May

The Chinese yuan is up 20% in the past year versus several major currencies due to it following the U.S. dollar higher. Exports to the U.S. have grown as exports to the rest of the world slide, increasing the U.S. share of Chinese trade. This is logical since the yuan hasn't strengthened versus the dollar. A healthy economy would also see imports rising due to a strong currency, but imports continue to tumble. China may also be experiencing an inverse J-curve in the trade balance due to the mix of import goods. Commodity prices are down and China is rebalancing away from commodity imports towards consumer goods imports. Trade figures should also rebalance as a result, but for now, Chinese trade data superficially confirms the "undervalued yuan" story favored by U.S. politicians.

AFP: China economy shows more weakness as imports, exports fall
Reuters: China's May crude oil imports drop, knocked off top buyer spot
Bloomberg: Americans Buy a Fifth of China's Exports

Americans bought almost $1 out of every $5 worth of goods that China exported in May, the highest share since August 2010.

While Chinese shipments to trading partners including Japan, Europe and South Korea tumbled last month from a year ago, those to the U.S. climbed 7.8 percent. That helped make America the destination for 18.8 percent of China’s exports, outstripping all others. The European Union took 15.1 percent, with 11.9 percent for the Southeast Asian grouping of Asean.

Evidence of China’s increasing reliance on the world’s largest economy comes just weeks before annual talks between the two nations in Washington, amid signs of tension over the yuan exchange rate. While the U.S. maintains that the yuan is significantly undervalued -- something that would give Chinese goods a competitive edge -- the International Monetary Fund disagrees.

The Chinese Customs report points to the narrowing fall in exports:

Customs: 今年前5个月我国外贸进出口下降 5月当月出口降幅继续收窄

In yuan:
May 2015 exports were up 7.9% from April 2015, down 2.8% vs May 2015, and up 0.8% YTD over 2014.
May 2015 imports fell 8.1% from April 2015, down 18.1% vs May 2015, and down 17.2% YTD over 2014.

The table of trading partners shows the U.S. is close to overtaking Europe as China's largest trading partner in terms of total trade. The trade surplus with both increased by roughly the same percentage. The trade surplus with ASEAN nations is nearly double versus last year, while the trade deficits with Australia and Brazil have tumbled. Imports from India, not a resource exporter, have crumbled as well.

This table of import goods shows where the drop has mainly occurred: natural resources. The drop in automobile imports shows the decline is not limited to commodities.