Skip to comments.Screeching Halt in China
Posted on 05/16/2012 9:56:17 AM PDT by Kaslin
China bulls are in for a multi-year shock because rebalancing from an economy overly dependent on exports is going to be far more painful, and last much longer than most think. Data is coming in much weaker than expected, but I propose this is only the very beginning.
The New York Times reports Data Signal Economic Trouble in China
China announced Thursday that growth in imports had unexpectedly come to a screeching halt in April rising just 0.3 percent from the same period a year earlier, compared with expectations for an 11 percent increase. Businesses across the country appeared to lose much of their appetite for products as varied as iron ore and computer chips.
Growth in other sectors appears to be slowing, too, particularly in real estate. Soufun Holdings, a Chinese real estate data provider, released figures Monday showing that residential land sales in the countrys 20 largest cities had fallen 92 percent last week from the week before, as declining prices for apartments have left developers short of cash and reluctant to start further projects.
In a series of interviews over the past week, bankers and senior executives from provinces all over China, in a range of light and heavy industries, cited a broad deterioration in business conditions. Two of them said that some tax agencies in smaller cities had been telling companies to inflate their sales and profits to make local economic growth look less weak than it really was, while reassuring the companies that their actual tax bills would be left unchanged.
There are early signs of a credit crunch, at least among private sector companies. Many seem to be asking their suppliers for more time to pay debts and complaining of cash flow problems. Zhang Jinmei, the sales manager at Qitele Group, a company that makes playground equipment in the coastal city of Wenzhou, said that local investment and lending pools there were starting to charge higher interest rates for loans, a sign of worries about creditworthiness.Imports and Exports Fall Way Short of Expectations
The Financial Times reports China trade: warning signals.
Whichever way you look at it, Chinas latest set of trade figures is bad news. Not only did both exports and imports fall short of expectations, they missed by quite a way.
Although the first half of 2012 was expected to be a tough one, analysts say action is needed soon if the Q3 rebound many have been pinning their hopes on is going to happen at all.
If the large jump in the trade surplus is the symptom, the economic illnesses look multiple.
Exports have fallen to Europe for the second month in a row, which, from a trade perspective, makes this a low-point since the opening depths of economic crisis.
That Chinese imports have fallen even faster is the greater worry. Many had hoped that Chinese shoppers (and builders) would rescue the rest of the world with a voracious appetite for everything. But that seems not to be the case, at least not until the credit taps are turned back on.Easily Predictable
All of this was easily predictable yet most did not see this coming and fewer still still see what is ahead. For example please consider this feeble China forecast by PIMCO.
Chinas slowdown may deepen as policy makers unwind the excesses of a record credit boom while only gradually increasing stimulus, leaving 2012 growth at the weakest in 13 years, Pacific Investment Management Co. says.
The economy is unlikely to bottom until the third quarter, Ramin Toloui, Pimcos global co-head of emerging markets portfolio management in Singapore, said in e-mailed comments May 13.
Pimco, which oversees the worlds largest bond fund, sees Chinese growth this year in the mid-7 percent range, a pace unseen since 1999. Its call is still lower than that of banks from Citigroup Inc. and JPMorgan Chase & Co. to Bank of America Corp. and UBS AG, which all pared their forecasts after April economic data were released last week.Bottom When?
Note the feeble forecasts by Pimco, Citigroup, JP Morgan, Bank of America, and UBS.
And what's with this bottom call by Pimco in the third quarter? I have to ask, third quarter of what year? 2020?
What a bunch of collective bunk!
I am sticking with 3.5% average growth for the rest of the decade, an idea proposed by Michael Pettis in a bet with The Economist. For details, please see 12 Predictions by Michael Pettis on China; Non-Food Commodity Prices Will Collapse Over Next Three to Four Years; Nails in the Hard Landing Coffin?
John Batchelor has been mentioning a lot of this on his radio show too recently. I think there was a big drop in electrical power use/output this last quarter too. The economic statistics/forecasts that say growth is 8-10% in perpetuity are not squaring with reality at all!
With little or no exports to EU or USA, There is also rumors of lack of confidence in the Leadership by the Chinese people. e.g. Blind dissidents
I am afraid he is overly optimistic.
China will slip into Recession.
Corrupt regional governors.
Murder of British "fixers"
With little or no exports to EU or USA,
There is also rumors of lack of confidence in the Leadership by the Chinese people.
e.g. Blind dissidents
No problem, the ChiComs can now take over our banks as per the FED:
About a week ago our wonderful FED okayed the ChiComs to take over banks in America. One is in the process of being taken over:
So how much of the funding of the anti bank thugs/occupiers/protestors is coming from the ChiCom banks?
Has anyone heard of this low noise level story?
Does anyone care?
The story was buried by the evolving pro-homosexual position of our pretender-in-chief
“The story was buried by the evolving pro-homosexual position of our pretender-in-chief!”
You are correct. The evolving pro-homosexual coming out by Obozo is more important than the Chi-Coms getting permission to open banks here.
” rebalancing from an economy overly dependent on exports is going to be far more painful, and last much longer than most think. “
Perhaps not quite as difficult, I’d imagine, as rebalancing an economy overly dependent on imports...
Why does anyone believe the numbers coming out of China???
It isn’t a transparent society built on law and openness. The numbers are whatever their Communist party masters says they are. No one knows how much currency they have printed, how much debt their banks carry, etc.
Why does anyone believe the numbers coming out of China???
It isnt a transparent society built on law and openness. The numbers are whatever their Communist party masters says they are. No one knows how much currency they have printed, how much debt their banks carry, etc.
I never have believed the numbers coming out of China.
” The numbers are whatever their Communist party masters says they are. “
And is this worse than our numbers being whatever our Democrat Party ‘masters’ say they are??
At least the Chicoms don’t *pretend* to be a ‘transparent society built on law and openness’....
Vietnam is eating China’s shorts! http://www.vietnam-report.com/the-vietnam-stock-market-report-05-03-2012/
The PRC isn’t going to tell us anything that they don’t want us to know.
Here’s a quick examination of the problem — OPEC bilks the entire world out of hundreds of billions every year.
China’s industries are roaring along building products for export to the US, while pouring some of that foreign exchange into OPEC’s coffers by having to import oil. Jihad in Africa, funded by OPEC’s petrodollars, crimps China’s plans to build production capacity there to supply the hungry Chinese market, even while China (and Canada last I knew) helps develop the oil production of Islamofascist Sudan.
Meanwhile, the Chinese plow a pretty large chunk of their export surplus into US government debt vehicles; in order to keep its economy growing and its assets from shrinking, China has to devalue its own currency against the US dollar. If it stops buying US debt, the dollar will fall, putting the brakes on Chinese exports to the US and causing a decline in the value of its previously acquired paper assets. China’s a rat in the wheel, IOW.
OPEC has been pricing oil in Euros for about ten years, while continuing to set its prices in US dollars (oil price stability in Euros has been its practice, IOW), in order to undermine Russian attempts to become the primary petroleum supplier of the EU, and to undermine EU moves to develop or redevelop its own fields.
Iran’s mullahcracy has continued to sell into the world oil market, despite 30 years of sanctions, but hasn’t been able to build modern refineries to supply its own market, relying instead on neighboring nations and the world market to obtain most of its gasoline. The logical move for Iran is a tactical and economic alliance with India, and (like the Molotov-Ribbentrop agreement) cooperative dismantling of the pseudostate of Pakistan.