Wednesday, 13 May 2009

Exports just keep on sliding

I am becoming more and more convinced that politicians all over the world are making non stop comments on "green shoots", "bottoming out" and similar phrases just for the sake of "talking up" the global economy - this is perhaps no surprise at all. I just don't buy it when you look what is happening on the ground.

The Chinese growth story is another one of the great falsehoods of our time. I do not believe the figures. If you take oil consumption as a REAL proxy for output it is continuing to fall despite the massive stimulus package.

The FT reports on the continued decline in exports. This is NOT a surprise to anyone with any sense.

When will anyone report what is really going on. Now I might be on the "extremely" dismal end of dismal scientist line but I can still not see any green shoots from where I sit.

Look at the FT first two lines. What I want to know is WHO said the worst was over and WHY?

This article at least puts things in perspective. I agree - China is massively ill prepared for a continued decline in demand for its exports. The world economy will not bounce back that quickly (or as quickly as some analysts believe).

Rant finished. Apologies.

Slide in Chinese exports will hit growth strategy [Financial Times]

Chinese exports fell steeply in April for a sixth month in succession, suggesting that the worst might not be over for the world's third largest economy.

The total value of Chinese exports fell 22.6 per cent to $91.9bn (£60.2bn) last month compared with the same month a year earlier - a faster rate of decline than the 17.1 per cent year-on-year drop in March.

Imports fell 23 per cent from a year earlier to $78.8bn in what some analysts said was a sign that domestic investors remained unwilling to invest in new capacity. Exports rose 6.9 per cent between March and April. However, the month-on-month figures are not seasonally adjusted and are regarded by analysts as misleading.

JPMorgan said it estimated that month-on-month exports fell 2.8 per cent on a seasonally adjusted basis after gaining 6.1 per cent month on month in March.

The monthly trade figures are being watched closely after some economists criticised Beijing's stimulus efforts for relying too heavily on an assumption that there would be a quick rebound in global demand for cheap Chinese exports.

"The top leaders have made the calculation that this crisis is nothing like the 1930s and the global economy is going to rebound quickly, at which point China will take a greater role in the world," one senior retired government official told the Financial Times.

That view is questioned by some economists. Stephen Roach, Asia chairman of Morgan Stanley, argued in an article that the Chinese government had miscalculated and was "clinging to antiquated policy and economic growth strategies that presuppose a classic snapback in global demand.

"That leaves China illprepared for what could well be the defining feature of the post-crisis world - an enduring US-led shortfall of external demand."

In its effort to boost growth, Beijing is investing huge sums in new infrastructure projects, while also providing ample support for its export industries in the form of favourable policies, cheap loans and tax rebates.

This strategy is "strikingly reminiscent" of the Chinese response to two earlier external demand shocks - the Asian financial crisis of 1997 and the bursting of the dotcom bubble in 2000 - according to Mr Roach.

In both those instances the Chinese export-led economy emerged from the downturn in an excellent position to take advantage of the rebound in global trade.

On a more positive note, the government said yesterday that fixed-asset investment in Chinese urban areas rose faster than expected in the first four months, jumping 30.5 per cent from a year earlier.



Anonymous said...

couldn't agree more...btw, here is the full piece that Roach put out a few weeks ago.

Dan said...

Couple questions/statements.

1. Is it possible April was slow because caution is causing many to delay purchases that they will make in June or July? I'm thinking Christmas items?

2. Doesn't this focus on products ignore how China's economy is, at least a little bit anyway, upgrading both in terms of the quality of its products, but also towards an increase in its service economy? Also, Chinese companies are truly finally starting to move overseas, which stimulates China's economy, without increasing its energy consumption. I can tell you that I am seeing all of this happening first hand as my law firm has gotten more Chinese clients coming into the United States just this year than in every other year combined.

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Charles Frith said...

I don't think things have even really started yet.

Thomas said...

Quote Dan: "Also, Chinese companies are truly finally starting to move overseas, which stimulates China's economy"

I'm a bit mystified by this comment: In what way does this stimulate China's economy?

China Economist said...

Thanks for the comments.

Dan's comment is actually very interesting. The Chinese are increasingly looking to utilise their profits overseas to gain more expertise and tehnology quickly which they will take back home (and hence improve the Chinese economy).

The Japanese did this in the late 80's before the crash. Remember the Rising Sun novel?

This is a sign that China is developing fast but is also a sign that it is over stretching itself.

The question is what are these "Chinese clients" doing in the US? Setting up manufacturing plants? Surely not? Buying up assets in the US fire sale? Maybe.


Anonymous said...

that's so chinese are comming for us,