After rapid deterioration of the world economy China’s government started to work on its massive stimulus program in November last year. Economists working on China had to work out how will it effect composition of China’s growth and the rest of the world.
With the countries growing faster than other countries, we expect imports into that country grow much faster than exports (or, fall much less). In the case of China, exports had been outgrowing imports and many were sceptical that this would change even as economic conditions were changing in a pronounced way.
Some argued that the stimulus had very little impact on import demand but in fact all trade volume was masked by price changes. Import of raw materials was rising since February but because imports in US dollar remained weak due to price declines, this was not recognized widely. Manufacturing imports remained weak longer but 9 months later we could see significant differents. This is so even though processing imports—imports used in the Chinese part of the international production networks, where parts are typically assembled for re-export—are still suffering.
This means that “normal” imports (imports into China’s domestic economy) are stronger still than suggested by the overall import numbers.
China is a fairly open economy that is well integrated into the world economy. The domestic demand strength is broader than just relying on infrastructure and this domestic strength has become a major driving force of the recovery in several neighbouring countries, including South Korea and Singapore.