Last month when China's exports “only” declined by 1.7% (revised) the entire orthodox world took it as a definitive signal for the long-awaited monetary stimulus effects. Whether it was the yuan's “devaluation” or the six rate cuts and the often double shots of reserve requirement reductions that accompanied them, December trade figures were so very encouraging. Economists, in particular, were quick to convince themselves of their faith in monetarism, as exports for January then were expected to “only” slide by 1.9%, similar to December, while imports were predicted to be almost flat – an unbelievable improvement given that imports had been contracting regularly by 15%-20% throughout most of 2015.

As it turns out, these expectations for the turnaround were literally unbelievable since the latest trade figures from China were nowhere near them. Instead, both exports and imports collapsed yet again as if December's monthly variation was only that. Exports dropped by 11.2% in January, the worst since March 2015 and the third worst of the “cycle.” Imports fell by 18.8%, more in line with last year's baseline and nothing like a turnaround or even the hint of one.

The slide in exports suggests the yuan's depreciation since August has yet to result in a sustained boost to the competitiveness of China's factories. While the decline in shipments to and from most major destinations raises concern of a lingering trade slowdown, the readings may also be influenced by the timing of China's week-long Lunar New Year holiday and volatility in trade flows with Hong Kong.

“Taken at face value these numbers are a negative sign for the Chinese economy,” said Shane Oliver, head of investment strategy at fund manager AMP Capital Investors Ltd. in Sydney. “But Chinese economic data is traditionally very volatile around January reflecting the floating timing of the Chinese new year and they may also reflect a correction to possible over-invoicing and disguised capital outflows that could have boosted the December data.”