Tuesday, January 13, 2009

AP: China Trade Slump Worsens - Exports Fall - and so do Imports

Not to worry folks; pile into those oil stocks and every commodity related issue because oil is up 1.2% and the Baltic Dry Index is SURGING up 0.0002%. Don't worry about facts - just stick to thesis.

Again, I will repeat this over and over - China will be far worse that the punditry believes in 2009. Every data point I've read over the past half year is getting worse; not "bottoming" or "improving". The "sirens" speak gleefully about 8%+ growth and sing songs of decoupling (still). "Look through the valley and on the other side is recovery" Mr. Cramer is screaming every day how China will be the savior... we'll check back in the summer.

So all the world is banking on "Obama stimulus" and "China resurgence" - two thesis (what is the plural for thesis?) that will sorely disappoint by the time we get "there". But as I always say - it doesn't matter what the reality is when we get "there" - as long as we believe it "here"; the stocks can be run up for no good reason. Facts be damned.

Even the chart (large cap Chinese stocks) does not agree with the punditry.

  • China's trade slump worsened in December as exports fell at their fastest rate in a decade amid global economic turmoil, government data showed Tuesday, aggravating a decline that has fueled a wave of layoffs and fears of unrest. December's export decline was the sharpest since April 1999, according to JP Morgan & Co.
  • December exports fell 2.8 percent from the same month a year earlier, after a 2.2 percent decline in November, the Chinese customs agency said. China's global trade surplus last year rose 12.7 percent over 2007 to a record $295.5 billion, possibly worsening tensions with the government of U.S. President-elect Barack Obama.
  • The slump in global sales has forced thousands of Chinese factories to close. Communist leaders worry about unrest as laid-off migrants stream back to their hometowns from coastal manufacturing regions without jobs or money. Labor protests have occurred in some areas. The government is pressing companies to avoid more job cuts.

  • "Starting in October, our orders dropped sharply. We basically stopped production after October," said Sun Bin, general manager of Huang Gang Hengsheng Clothing Import & Export Co. in the central province of Hubei. The company sells clothing to the United States, Europe and the Middle East. "We don't dare to produce, because the more clothes we make, the more we will lose," Sun said.

  • Adding to exporters' misery, China's yuan has risen over the past year against the U.S. dollar. That has squeezed companies that receive dollars for their goods but pay wages, rent and other expenses in yuan.

  • The decline in China's imports also accelerated in December, with purchases of foreign goods falling 21.3 percent, according to the customs agency. That was a bigger than November's 17.9 percent decline and reflected China's domestic economic slowdown. The drop was due in part to lower prices for imported oil and raw materials but also reflected weaker demand in domestic industries such as construction, auto sales and steel.


On a related note - the worse China's economy gets & the more they spend on programs to stimulate domestic demand, the more one has to ask - who is going to buy all this debt we are going to unleash on the world (answer: the Federal Reserve i.e. the left hand will create money and the right hand will buy it)

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