What's going on?

You might remember that a month ago we reported on some surprisingly good March export data for China and said that it was evidence of the ongoing Chinese turnaround. Well, it turns out that April�s data reversed: exports declined. For that and other reasons, investors are starting to fear that China�s recent recovery is stalling.

What does this mean?

Not only did exports decline, but imports were also particularly weak (they fell more than 10%, double the expected fall). That suggests that there is less �demand� in China than previously thought (i.e. factories don�t actually need as much steel because they aren�t going to build that new extension). The release coincided with the Chinese stock market closing at its lowest level for 2 months. Increasingly, there have been signs that China�s recent government-driven stimulus might be slowing down (like this article in the state-owned People�s Daily on an �L-shaped� recovery).

Why should I care?

For markets: Commodity prices fell further on Monday. China�s government-led stimulus is seen as having driven the huge commodities rally that has taken place over the past 3 months. The fear that this stimulus is now slowing is leading to a commodities selloff (e.g. iron ore fell 6% on Monday). That�s bad, for example, for miners like Rio Tinto�and steelmakers like US Steel.

The bigger picture: China�s �piggy bank� has been improving. We reported quite a lot on China�s �piggy bank� of savings that it keeps in foreign currencies. The value of its �piggy bank� (a.k.a. its reserves) was steadily declining each month. The good news is that its value has been increasing in recent months (in US dollar terms, which is the standard way to value China�s reserves). That�s due partly to the weaker US dollar (which pushes up the relative value of China�s Euro and Yen savings) but also because�less money appears to be leaving China.