Last week, China’s General Administration of Customs released July trade data showing that China’s exports slowed to a 1% year-over-year growth, down from 11.3% in June, while July imports grew 4.7% as compared to 6.3% in June. Meanwhile, China’s trade surplus fell a whopping $6.6 billion, from $31.8 billion to $25.2 billion.
To put it into perspective, this drop in China’s trade surplus is similar in size to the JPMorgan Chase’s “whale” trading loss over the first and second quarters, and the $5.2 billion loss that the U.S. Postal Service announced for the third quarter.1 But China’s trade data has perhaps validated some investors’ worries with regard to China’s outlook: the U.S. and European slowdown is taking its toll on China’s export growth engine. After 2009, when many investors felt that China saved the world by outgrowing widespread global economic malaise, this data has created some nervousness in the market by showing that China can’t come to the rescue this time.
Should Investors Be Worried?
We certainly aren’t.China’s export engine has become a smaller driver of growth in recent years. This has been in line with policymakers’ goal of stimulating investment in the country from 2008 to 2010, and, more recently, trying to bring the Chinese consumer online over the past year or so. It was China’s large infrastructure spending which brought its ownGDPgrowth higher after the Lehman crisis, which, in turn, fueled commodity demand that pulled many emerging markets and commodity producers such as Australia higher. Since China’s property markets began to bubble, policy has been rejigged to slow this sector down while keeping overall growth high through incentivizing consumption. Wages grew, and Chinese consumers are already showing their force in the domestic and global marketplace. As such, import growth is still growing positively—and significantly—this year.
The silver lining in the “bad” export data is that we feel more comfortable than ever that policy in China will turn more stimulative in the near term. Monetary authorities will likely deliver another interest rate cut, and perhaps two or three more Reserve Requirement Ratio cuts this year. Continued measures for non-speculative property purchases are probably in the pipeline, along with incentives for local infrastructure projects and fiscal measures. The leadership transition this fall may cause a delay in implementation of key initiatives, but most leaders recognize the importance of growth. All in all, we expect China’s GDP growth for 2012 to be about 7.5%, presenting a stabilizing factor for the global economy this year. Perhaps China won’t save the world this time, but it shouldn’t derail it either.
- USPS.com, 8/9/12. (http://about.usps.com/news/national-releases/2012/pr12_091.htm)
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WEBC.081312.03
A portfolio manager who doesn’t see inflation coming like a freight train at you! China put more than 60 billion into the economy in March and several more triple r moves and still their economy is lifeless. 7.5% GDP growth? I don’t think so. July trade data was a surprise, we are only mid way plus one month through the year, December is not going to be any prettier. Can anyone say “exponential energy usage, population growth and fixed supply lines”? One strike in South africa shut down around 20% of all platinum mining this August.
Chinas August economy is not so august anymore.
Hmmmm ……… You seem quite taken with China’s management of their economy. Do you think the United States economy should be managed the same way?
Ideas to help the U.S. economy and create jobs. Tell foreigners they have to build factories here in American and hire Americans if they want to continual to sell in are consumer market.If not they will no longer be allowed to sell their products in the U.S. market and we will turn to country B or C that makes the same products. Next, when we are no longer the reserve currency of the world, we should opt out of the IMF and Washington DC will deceide what are currency is worth just like China does today and since we beleive in fair-trade we will peg are dollar 40% below the Chinese yuan. Hey fair trade. Also put more tariffs on Chinese imports like we’ve done with Chinese solr panels. This protects American jobs.
Another thing we could do is defalt on are forien tresury debt we owe China ? Furthermore, Europe and the United States should quit trading with China. In addition, we could tell the communist leaders in China since you don’t want to corporate on pegging the yuan to are dollar which gives China an unfair trade advantage we no longer want to corporate in the field of energy ? How are you going to run your factorys? Another thing, we could use are military and win economie warfair against China. Finally, who ever becomes the next U.S. President, he needs to hold a chief econmic summit with American citizens who have thire factorys overseas and tell them you need to bring some factorys back to the United States and tell thease owners I know you will say it’s cheaper on labor and materials costs to produce your product overseas especially in China but, heres what you can do Mr. American citizen ? use all the forigen markets to raise the price on your products and use the money as a subsidy to lower the cost of your American factories where labor and materials cost more.
In closing, I want to say my ideas will create jobs here in America and it does’nt raise the Nations debt limit.
PS I have written the U.S. President and three U.S.Congressmen about thease ideals so, are government has the knowelge to help are country.