Skip to main content

China -- the export machine continues

From the Telegraph yesterday morning:

China's trade figures released this morning are shocking. They tell us that China is still flooding the world with excess goods, and is once again a net drain on global demand.
As you may have seen, Chinese exports surged 22pc in February. Imports fell 15pc.
This is exactly what pessimists feared. For all the talk of a great shift by China away from export-led growth to internal demand, the reality is that the Politburo is still propping up the same old system, still shovelling subsidies to loss-making firms and state behemoths to keeps factories open.
Investment is still 49pc of GDP. Consumption is still 36pc. China is still a massively deformed economy, and the global effects of its imbalances are getting bigger every year as the economy grows at far higher rates than the West.
For all those who insist that China is now moving towards a consumption society I say BullShit!  The immediate reality of China's government is that they don't want any social dislocation.  They know (not stupid these guys) that there is a cost to what they are doing.  It remains that the artifice of borrowings against raw material (its complicated) has more or less stopped, leading to a dramatic drop in imports (down 15%), while the "engine of growth" that is export continues on its merry way.

More from the Telegraph:

We have now reached a stalemate all too like the 1930s. The West is trying to counter the effects by currency devaluation, ie QE. This exports inflation to those countries such as China holding down their exchange rates with pegs or dirty floats. It is a way of hitting back.
Everybody knows that this is unsustainable, but no one wants to be the first to move!  First mover will get crushed.  As an example the west could start a trade war, that would lead to inflation.  If you look at certain European countries (Spain, Greece and Italy) you have tremendous unemployment, and among the young it is even worse!  Imposing trade barrier would bring inflation at home, would also create jobs as manufacturing would return, in some fashion, home.  The cost of all this would be tremendous, but the road we are on is unsustainable, the more we wait the worse the correction will be (thing US housing market).

BTW there is no easy solution here.  The reality of world trade is that inertia controls a great deal of what will happen over the next few years.  Those with economic power will retain control (and the current system) as long as possible.   


Popular posts from this blog

Trucker shortage? No a plan to allow driverless rigs

There are still articles on how America is running out of truckers -- and that its a huge problem, except its not a problem, if it was a problem salaries would rise to so that demand would clear. Trucking is one of those industry where the vast majority of participants are owner/operators and therefore free agents.

Salaries and cost are extremely well know, "industry" complains that there are not enough truckers, yet wages continue to fall... Therefore there are still too many truckers around, for if there was a shortage of supply prices would rise, and they don't.

What there is though is something different; there is a push to allow automatic rigs to "operate across the US", so to encourage the various authorities to allow self driving rigs you talk shortage and hope that politicians decided that "Well if people don't want to work, lets get robots to do the work" or words to that effect.

This has nothing to do with shortage of drivers, but every…

Every punter says oil prices are on the rise: Oil hits $48/bbl -- lowest since September 2016

What the hell?

How could this be, punters, advisors, investment bankers all agreed commodity prices  in general and oil prices in particular are on the rise...its a brave new era for producers and exporters -- finally the world is back and demand is going through the roof, except not so much!

What happened?  Well energy is complicated, the world operates in a balance -- 30 days of physical reserves is about all we've got (seriously) this is a just in time business.  So the long term trend always gets hit by short term variations.

Global production over the past 12 months has risen by somewhat less than 1.5% per annum.  As the world market changes production becomes less energy intensive (maybe), but the reality is that the world is growing more slowly -- America Q4 GDP growth was around 1.9% (annualized) Europe is going nowhere fast (the GDP growth in Germany is overshadowed by the lack of growth in France, Italy, Spain (lets say 27 Euro members generated a total GDP growth of 1.2…

Paying for research

This morning I was reading that CLSA -- since 2013 proudly owned by CITIC -- was shutting down its American equity research department -- 90 people will be affected!

Now the value of a lot of research is limited, that is not to say that all research is bad. In fact, I remember that GS's Asia Aerospace research was considered the bible for the sector.  Granted, there was little you could do with the research since the "buy" was for Chinese airlines...that were state owned.  Still it was a vey valuable tool in understanding the local dynamics.  It seems that the US has introduced new legislation that forces brokers to "sell" their research services!  Figures of $10,000 an hour have been mentioned...

Now, research can be sold many times; if GS has 5000/6000 clients they may sell the same research 300x or 400x (I exaggerate) but this is the key -- Those who buy the research are, I presume, prohibited from giving it away or selling it, at the same time the same rese…