Should We Expect Further Weakness in Chinese Imports?

• In the past year, China imports have been decelerating sharply due to the sharp slowdown in the domestic economic activity and the liquidity contraction in 2021.
• As for South Korea exports, macro analysts have historically used China imports as one of the key inputs when computing a global leading economic indicator.
• For instance, the chart below shows that China imports have strongly co-moved with industrial commodity prices (i.e. copper) and have been pricing in lower copper prices since the start of the year.

• With economic data deteriorating sharply in the past two months in the major economies, investors have questioned if global demand will continue to fall in the medium term, pressuring commodity prices to the downside.
• The chart below shows that G10 economic surprises have historically strongly led China imports by 6 months.
  • Note that we limited the range of the G10 economic surprise index to -100 / +100 following the Covid shock.

Source: Bloomberg/MNI