China's exports continue to disappoint. They fell 18% in January and 26% in February. March showed a slightly better performance, with a 17% fall. But April was weak again, with a 23% decline in exports and imports.
China's problem today is based on its past success in becoming the manufacturing capital of the world. Exports now account for 37% of GDP, compared to 20% in 2001. And they are focused on durable goods such as refrigerators and microwaves, where sales are directly linked to the health of Western housing markets.
As Nobel Prize-winning economist Paul Krugman noted in Shanghai today, "I think it's difficult to see where a great revival of existing Chinese exports to the U.S. will come from. The U.S. is almost certainly going to be facing bleak consumer spending for an extended period."