Thursday, May 21, 2009

Credit Suisse Joins Others in Call: China's Recovery Stalling

Reader Jason notified me of this story from Bloomberg.... I am posting it simply for entertainment purposes as it is completely legitimate that an economy based on exports, relying on multiple 1st world economies in historic recessions - has within months transformed itself to a consumer led economy via the power of following the Alan Greenspan/Ben Bernanke model of flooding the economy with currency & loans galore. Just repeat "decoupling" to yourself 3 times, tap your ruby slippers and repeat "there is no place like China, there is no place like China, there is no place like China". Ignore the fact decoupling was discredited a mere 12 months ago (we have short memories) and insist this time it's for real. Then take this red pill and forget you ever read this .....shall I call it .....heresy.
  • China’s economic recovery began to stall in the second half of April and is slowing further this month, raising concern that the rebound won’t be as “strong as many recently have hoped,Credit Suisse Group AG said.
  • Retail industries including electronics and department stores have weakened, adding to a slump in power consumption, Dong Tao, a Hong Kong-based economist said in a report.
  • The pace has slowed, even reversed in some sectors,” Tao said. “The trend has become more visible in May.”
Apparently not only Credit Suisse has this view
  • Credit Suisse, Switzerland’s biggest bank by market value, joins the World Bank and Oppenheimer & Co. this week in raising concern about the strength of the world’s third-biggest economy. The World Bank said today enthusiasm about a recovery may be “premature.” Katherine Lu, Oppenheimer’s China equities director, said the economy is “struggling” and may fall short of the government’s 8 percent growth forecast.
  • “Renewed concern about China’s growth momentum could trigger a market correction,” Credit Suisse said.
  • David Dollar, the World Bank’s country director for China, said today it was “hard to get too excited about the future” for the economy because private investment is lagging government spending. Private investment, the main driver of growth, was “way down” in the first quarter, Dollar said at a forum in Beijing, without citing a figure.
  • China’s economy expanded 6.1 percent in the first quarter, the slowest pace in almost a decade. Overseas shipments declined 22.6 percent in April from a year earlier, the customs bureau said last week.
  • Manufacturing may falter in coming months after expanding in March and April, Tao said. The Purchasing Manager’s Index, or PMI, rose to 53.5 in April from 52.4 in March. A reading above 50 indicates an expansion. “The PMI runs a risk of slipping below 50 over the next few months,” Tao wrote.
Since almost every single green shoot in the world is dependent on the 3rd largest world economy carrying the 1st, 2nd, 4th, 5th, 6th, 7th (you get the point) on it's back through a $500 Billion economic stimulus let us not imagine the possibilities if at some point the steam runs out. Also, let us not think about how many bad loans are being made day by day as money is shot out in all directions via loans to "stimulate" growth in any fashion possible. Because if there is one thing we've learned, it's that easy money and credit granted to almost any comer is indeed a formula for prosperity.

Again, all things being equal China is in far better shape than us, and has reacted far better than we have in many ways. But they also started from a far better place. Over the coming years they will evolve from an export heavy economy to one driven by internal consumption in its growing middle class. But to expect cultural habits (high savings rates) and a complete transformation in an economy in a mere matter of months is the stuff of.... green shoots. This process will take many years.

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