Monday, February 9, 2015

China Trade -- what's going on?

So yesterday (Sunday) China announced its January 2015 trade position; and the result was surprising:

Exports:  Down 3.2%  Expected:  +5.9%
Imports:  Down 19%   Expected:  -3.2%

Subsets:

Crude oil imports fell 41.8%
Iron ore imports fell 50.3%
Coal imports fell 61.8%
Exports to the European Union fell 4.4%
Exports to the Hong Kong fell 10.9%
Exports to the Japan fell 20.4%
Exports to the Russia fell 20.4%

None of this is good, in fact its terrible (sure China has a huge surplus...but) the implications for Canada and Australia are very serious in deed.  The Canadian correction will be massive (aside from Real Estate prices, we can expect job losses from a reduction in primary good exports) -- the same for Australia that is a major coal exporter.

The story is always the same, while economic growth numbers can be "massaged" imports of "energy" cannot.  Fundamentally for economic growth (in an economy that makes things) there is a requirement for energy -- one of the transformation components.

Now, some of the collapse can be set against China's massive anti-corruption drive,where Chinese company would import certain raw materials -- use them as collateral (many many times) and borrow extensively from China's massive near-bank financial institutions.  Last year one trader had borrowed more than 500 times against his holding of copper.  Needless to say that he's since disappeared (in prison or another country). Some of the collapse can be caused by Chinese New Year  -- when the country essentially shuts down for a week of celebration.

However, The numbers are huge, 40% collapse in oil imports, the same for Iron ore, and coal is down 60%  these are massive numbers.  It would seem that China's clients are having a hard time, when your clients are suffering things have to be hard for you too.




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