Further signs that the Chinese economy is in the throes of a serious downturn. From Bloomberg:
China’s exports shrank last month and industrial-production growth cooled, Fan Gang, an adviser to the People’s Bank of China, said today.
“Things are not so good,” Fan said at a forum in Beijing. “November figures will come out soon, and industrial growth will be something around 5 percent and export growth will be negative.”
A collapse from October’s 19.2 percent export growth would add pressure on policy makers meeting in Beijing this week to do more to sustain the expansion of the world’s fourth-biggest economy…..
“It doesn’t really matter what China does to try to revive exports, they are going to be bad for the foreseeable future,” said Paul Cavey, an economist with Macquarie Securities in Hong Kong. “The key now is what can be done to boost domestic demand.”…
Chinese leaders, meeting for three days to set economic policy, may cut personal income tax to help boost consumption, according to Kevin Lai, senior economist at Daiwa Institute of Research in Hong Kong.
Industrial-output growth of 5 percent would be the weakest since Bloomberg data began in 1999 and worse than the 7.2 percent median estimate of 14 economists in a Bloomberg News survey. Production rose 8.2 percent in October…
China needs to prepare for a “worst case scenario” as the global slump deepens, Central bank Governor Zhou Xiaochuan said Dec. 4. Exporters of toys, clothes and furniture are cutting production or closing down, triggering a surge in labor disputes and increasing the risk of social unrest in the world’s most populous nation.
Labor disputes almost doubled in the first 10 months of this year as businesses closed and some owners fled, the official China Daily newspaper reported Dec. 5. …
The yuan’s biggest one-day decline in three years on Dec. 1 also has prompted speculation that China may allow its currency to depreciate, helping exporters by making their products cheaper in overseas markets.
The yuan may weaken as much as 10 percent against the dollar, Morgan Stanley said last week. In contrast, Commerce Minister Chen Deming said that the nation won’t rely on currency depreciation to help exporters who are suffering because of shrinking demand.
China should stick to a “gradual” approach on the currency and policy makers shouldn’t bow to pressure for a sharp fall in the yuan, central bank adviser Fan said today. He is the only academic member of the bank’s monetary-policy committee.
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This is might not be such a big story for domestic fiscal policy, as this doesn’t necessarily imply an outright decline in the amount of funding China can provide to the U.S. Their imports are dropping even faster as commodities plunge. It’s more just evidence that trade continues to break down.
It’s quite remarkable to see trade collapse without any active policy preventing it — encouraging trade, even! India’s on the boat now — even as shipping costs plunge and the same original misalignments remain.
It speaks volumes for the depths of this economic dislocation.
I don’t see how. I mean, anyone who buys anything nowadays buys something from China. I looked and even the garlic at the supermarket comes from China.
The claim that china’s growth may have shrunk to 5 percent as exports have slumped may of course be an optimistic view and needs to be put in context. South Korea has already reported an 18.3 percent drop in exports in November and Taiwan reported on Monday that its exports in November fell 23.3 percent . This was the guy who in october is quoted as saying The Chinese economy won’t experience big problems.
At the Canton Fair recently we here that contracts signed were down 15.8 percent and into negative growth for the first time and this includes Machinery and Electronic goods trade which the world bank expects to continue growing. Wu Jianhai, a Wenzhou-born businessman pointed to the devaluation of the Euro as being a fatal strike on Chinese traders. Many companies have recently taken out big investment loans for expansion and new equipment and are struggling to pay debts, which hints at the involvement of vast investment fund flows that were going into China earlier in the year. When the likes of addidas shift production from China to Indonesia and Vietnam on volume declines causing a pricing tipping point, it does look like things may not be so rosy. Chinasavvy’s Devereux agrees that the downturn is likely to push up quality because China will shift from being a seller’s to a buyer’s market, which in turn should hasten the decline of the low-margin manufacturer. This is perhaps a more sobering thought as China begins to compete on much better terms with global companies and begins to steal market share in areas where they have been weak.
This week we hear China’s central bank drained 22 billion yuan via 28-day bond repurchase operations which caused the Yen to rise. This comes just after Paulson went to visit last week. In contrast Gao Xiqing in an interview with James Fallows who overseas 200 billion of China’s 2 trillion in dollar holdings says he is betting against the dollar. It is also interesting that he sees that long term, pulling out of dollar assets might not be a bad thing, but points out that because US markets are the most viable and predictable he sees opportunities. His ultimate view is that the US should tell their people that they need to save and come out with a long-term sustainable financial policy.
Non of what I am hearing bodes well for China in the short term or the US in the long term unless it accepts some painful adjustments.