Detroit automakers, German industrialists, Japanese electronics makers - in fact, almost any manufacturer you care to mention - would delight at such a modest fall in their order book. China, the world's favourite factory floor, reported a mere 2.8 per cent year-on-year drop in exports in December. This underplays, or rather lags, the damage. The biggest hint comes from neighbouring countries. Exports from South Korea and Taiwan, the third and fourth biggest exporters to China last year, in December fell by 17 per cent and 42 per cent respectively. Many of these shipments contain parts which China processes or assembles and then ships to the rest of the world. If Chinese imports of such components are down by about a third, you can bet a more serious export slump will follow soon. Prices are also falling. Chinese shipment prices to the US fell by 0.6 per cent month-on-month in November, according to US data . Morgan Stanley calculates the Chinese export contraction, measured in local currency, is about 10 per cent.

Exports account for about one-third of China's economic output, although measured by value-added it is closer to a 10th. Thus any upcoming steeper fall would crimp economic growth. Officials are warning that an 8 per cent economic growth rate - the level seen as necessary to provide sufficient jobs and thus preserve social stability - could be a stretch this year. Some private sector economists are pencilling in as little as 5 per cent, about half the recent run-rate. At these levels risks arise: increasing job losses, more bad debts in the banking system, all crowned with social unrest. That leaves an awful lot riding on Beijing's stimulus package and monetary policy. And increases the odds of an ugly quarter or two before the effects of extra spending kick in.