China's surprise trade surplus is certainly adding to pressures on Beijing to allow the yuan to appreciate faster - but the numbers also carry a more stark and dire warning for Canada.
China's economy and its crucial demand for commodities produced in Canada and by Canadian companies is weakening.
The unexpected trade surplus was driven by weaker than expected imports, particularly commodities.
Beijing says China's imports rose 21.8 per cent year-over-year in April, well short of an expected 28.9 per cent increase. According to Capital Economics in London, this was equivalent to a 4.1 per cent month-over-month seasonally adjusted decline and the largest drop since January of 2010.
While the earthquake and tsunami disaster in Japan and the subsequent fall in Japanese exports to China account for about one-third of the decrease, a striking decline in commodity import volumes, particularly copper, are critical to understanding the data.
Due to strong prices for oil, iron ore, aluminum and other materials, the dollar value of imports increased. However, the volume imports of many key commodities are actually falling outright. Capital Economics estimates that the overall volume of commodity imports in April was lower than the same month last year.
Most striking is the plunge in copper imports - 13 per cent lower than a year ago in dollar terms and 20 per cent lower in volume.
The message is clear. The growth of China's massive economy is beginning to slow as stimulus funds peter out and aggressive monetary tightening measures take effect. As well, labour pools are becoming tight as fewer migrant workers from the countryside head to coastal manufacturing hubs.
While many have tried to explain last week's commodity selloff "flash crash" as the result of electronic stop-loss trades and other non-fundamental reasons, the trade numbers back up concerns that China's insatiable commodity demand has limits.
"Concerns about a slowdown have certainly intensified, and the risks of a worst-case scenario for the Chinese economy, namely a relatively low growth rate and high inflation, are on the rise," Xu Biao, an economist with China Merchant's Bank in Shenzhen, told Reuters.
Indeed, Capital Economics says the most significant risk to China's economy is no longer from overheating, but rather, from a hard landing.
"We do expect commodity prices to drop further and that the rebalancing of China's economy over the past few months will rapidly unwind," the firm said in a report.
A major question is whether Chinese copper buyers are merely delaying purchases due to high prices and large stockpiles of the metal in Shanghai or if actual demand for use in infrastructure and building projects will slow significantly.
Policy makers have moved aggressively to curtail speculation in China's property market by raising interest rates and tightening mortgage rules. However, Beijing hopes an expected reduction in private property development will be offset by ambitious plans to build millions of low-cost housing units.
What's clear is that China is highly unlikely this year to achieve the 10 per cent GDP growth it has averaged for the last decade. Indeed, as part of its most recent five-year plan, Chinese policy makers are targeting slightly slower GDP growth of between 7 per cent and 8 per cent, as the economy shifts away from being export driven to relying more heavily on domestic consumption.
Even a small drop in China's GDP growth will have serious implications for commodity producers in Canada and the rest of the world.