bulls are in for a multi-year shock
because rebalancing from an economy overly dependent on exports is going to be
far more painful, and last much
longer than most think. Data is coming in much weaker than expected,
but I propose this is only the very beginning.
The New York Times reports Data Signal Economic Trouble
announced Thursday that growth in imports had unexpectedly come to a screeching
halt in April — rising
just 0.3 percent from the
same period a year earlier, compared with expectations for
an 11 percent increase. Businesses across the country appeared to lose much of their appetite for products as varied as iron ore and computer chips.
Growth in other sectors appears to be slowing, too,
particularly in real estate.
Soufun Holdings, a Chinese
real estate data provider, released
figures Monday showing that residential land sales in
the country’s 20 largest
cities had fallen 92 percent last week from the week before, as declining prices for apartments have left developers short of cash
and reluctant to start further projects.
In a series of interviews over the past week, bankers
and senior executives from
provinces all over China, in a range of light and heavy
industries, cited a broad
deterioration in business conditions. Two of them said
that some tax agencies in smaller cities had been telling companies to inflate their sales and profits to make
local economic growth
look less weak than it really
was, while reassuring the companies that their actual
tax bills would be left unchanged.
There are early signs of
a credit crunch, at least among private sector companies. Many seem to be asking
their suppliers for more
time to pay debts and complaining of cash flow problems. Zhang Jinmei, the
sales manager at Qitele
Group, a company that makes playground equipment in the coastal city
of Wenzhou, said that
local investment and lending
pools there were starting to charge higher interest rates for loans, a sign of worries about creditworthiness.
and Exports Fall Way
Short of Expectations
The Financial Times reports China trade: warning signals.
Whichever way you look at it,
China’s latest set
of trade figures is bad news. Not only did both exports and imports fall short of expectations, they
missed by quite a way.
Although the first half
of 2012 was expected to be a tough one, analysts say action is needed soon if
the Q3 rebound many have
been pinning their hopes on is
going to happen at all.
If the large jump in the trade surplus is the symptom, the economic illnesses look
Exports have fallen to Europe for the second month in a row, which, from a trade perspective, makes this a low-point since the opening depths of economic crisis.
That Chinese imports have fallen
even faster is the greater worry. Many had
hoped that Chinese shoppers (and builders) would rescue the rest of the world with a voracious appetite for everything. But that seems not to be the case, at least not until the credit taps are turned back on.
All of this was easily predictable yet most did
not see this coming and fewer still still see
what is ahead. For example please consider this feeble China forecast
may deepen as policy makers unwind the excesses of a record
credit boom while only gradually increasing stimulus, leaving
2012 growth at the weakest in 13 years, Pacific Investment
Management Co. says.
“The economy is unlikely to bottom until the third quarter,” Ramin Toloui, Pimco’s global co-head of
portfolio management in Singapore, said in e-mailed comments May 13.
Pimco, which oversees the world’s largest bond fund, sees Chinese growth this year
in the “mid-7 percent range,” a pace unseen
since 1999. Its call is still lower
than that of banks from Citigroup Inc. and JPMorgan Chase & Co. to Bank of America
Corp. and UBS AG, which all pared
their forecasts after April economic data were released last week.
Note the feeble forecasts
by Pimco, Citigroup, JP Morgan, Bank of America, and UBS.
And what's with this bottom call by Pimco in the third quarter? I
have to ask, third quarter
of what year? 2020?
What a bunch of
I am sticking with 3.5% average growth for the rest of the decade, an idea proposed by Michael Pettis in a
bet with The Economist. For details, please see 12 Predictions by Michael Pettis on China; Non-Food Commodity
Prices Will Collapse Over Next
Three to Four Years; Nails in the Hard Landing Coffin?