The NY Times Is Misleading. And Who Is Correct? Eurostat or China Customs?
The NY Times reports quite a dire situation as regards the slump in the value of Chinese exports to the European Union in July:
Data published this month showed that China’s exports to the European Union had sunk 16.2 percent in July to $29.4 billion, compared with July 2011.
This statistic (bolded by yours truly) is misleading.
First, China Customs measures exports in nominal dollars. If you look at Chinese exports measured in, let’s say euros, it doesn’t look quite as bad. In July, exports to the European Union (EU 27) dropped -3.6% over the year measured in euros versus a -16.2% annual decline measured in dollars. The dollar appreciated against the euro over the measurement period so the drop in China’s exports to the EU 27 is much lower in euros.
Note: This is only an approximation since I use the average monthly exchange rate, which is unlikely to align perfectly with China Customs’ measurement period.
An interesting corollary to the FX impact on ‘value’ statistics is the various statistical agencies that report presumably the same statistic. Eurostat publishes import data by partner and in euros. Using the average exchange rate over the month, I calculate the value of EU 27 imports from China reported in dollars for comparison to the China Customs data. Eurostat data is available only through June.
In June, Eurostat reports that EU 27 imports from China dropped -11.1% measured in dollars compared to the reported -1.1% annual reduction in exports from China to the EU 27 by China Customs. Clearly the trend is downward; but the Eurostat data only loosely matches the China Customs data. Balance of payments statistics are subject to large ”errors and omissions”.
Note: In the chart below, Eurostat data is illustrated in the series “EU imports from China”, while China Customs data is illustrated in the series “Exports to EU”.
So who’s right? Eurostat or China Customs? Part of the differentiation involves the timing of the FX moves (remember I use the monthly averages); but that is unlikely the full story here. I’d err on the side of Eurostat, and notice the trend looks pretty bad no matter who’s estimating the trade data.
4 Responses to “The NY Times Is Misleading. And Who Is Correct? Eurostat or China Customs?”
Note also that there can be relatively large differences between the corresponding "exports of X to Y" and "imports of Y from X" data due to the reporting of trade data as f.o.b. ("free on board") or c.i.f. ("costs, insurance, freight"). One would have to check to see if the Chinese report their exports in fob or cif; I would suspect they use fob, which should normally be lower than cif.
I disagree that the NYT is misleading. Most of China's imports are priced in dollars, and China's currency is closely tied to the dollar. So it is absolutely correct to say that from China's perspective the value of its exports to Europe was down by 16%.
Thanks! In levels, I would agree that this differentiation is quite critical. Eurostat measures imports on a CIF basis, while China Customs measures exports on an fob basis – this explains some of the discrepancy of the level of exports (I found this census paper from 1995 that reconciles US trade w/ Chinese trade to be quite helpful https://www.census.gov/population/international/f…. The census paper explains a reasonably complicated adjustment process (see page 27).
Wouldn't the Y/Y figures adjust for at least some of this discrepancy in measurement of the levels? At any rate, the Eurostat Y/Y import numbers have dropped well below the Chinese export figures since 2011, where in 2010 they were roughly similar.
As you say, the fob/cif distinction would only affect levels, not growth rates, unless there were changes in overall transportation costs from one year to another. But I don't think this can be the main explanation of the differences between sources. Another possibility is differences in data vintages between official Chinese data and Eurostat data… Here, I would expect that the Chinese data would be the more up-to-date.