Probing into Recession by Culling out Price Factor   

To judge the current economic situation, it is acceptable that the production and exports/imports data counted in RMB or dollars are used to compare with the preceding year or month, while the price changes in the same period, represented by the varying of CPI and PPI, are also reported. China's exports and imports figures, described in US dollars, have reported a double digit drop in the past months of this year. But, if probing into the actual trade amount, it can be found that the imports amount of petrochemicals and chemicals showed a positive growth, at least in April and May, adversely, the exports amount actually fell over the year-ago period. It can be said that the demand for chemicals in China really started recovery.
   Typically, when reviewing the export and import data, CNCIC (China National Chemical Information Center) classifies chemicals and related products as seventeen segments. China imported 102.44 million tons of chemicals and related products and exported 100.27 million tons in May. The imports amount of other chemicals segment (including chemical fibers etc.) was 70.05 million tons, increasing 35.87% year on year, while the imports value fell 20.71%. The imports amount of crude oil and natural gas segment was 18.07 million tons, up 6.9%, while its import value dropped 46.95%. The imports amount of organic raw materials was 3.97 million tons, up 48.79%, and the value fell 10.48%. The imports amount of resins was 2.64 million tons, an increase of 16.7% and the imports value plunged by 15.25%. The biggest difference was given by the 894 thousand tons imports for the inorganic raw materials segment, a 55.8% positive growth in amount compared to a 45.8% drop in value. To sum up the differences between imports amount and imports value on major segments, around 50% price drop year over year can be derived.
    As for exports, China exported 100.27 million tons of chemicals and related products in May, approaching to the total imports amount. The exports amount of other chemicals segment was 46.16 million tons, down 30.13% year on year, the value fell 15.0% only. The exports amount of plastic articles was 19.06 million tons, a decline of 1.62% while the value decreased by 10.18%. The exports amount of refining and coking products was 9.27 million tons, down 46.2%, and the value fell 63.45%. As a summary, the export price drop does not exceed 20% on average.
   Price is the key. The 50% drop in imports is nearly equal to the price drop of crude oil in the global market. The recovering demand in China attracted more imports that, in adverse, constrained China's exports. If China's exporters are able to afford a 50% price drop, what will the situation be?
   The Ministry of Finance of China officially reported the state owned enterprises all over the country achieved a profit of RMB425.4 billion in the first five months, 30.3% lower than the same period of 2008.

Zhong Weike
June 29th, 2009