China’s imports soar; good news for the U.S. economy
It quite likely puts off any move to allow its currency to appreciate against the U.S. dollar, but news that China’s imports were up 45% in February 2010 from February 2009 is great news for the still struggling economies of the developed world.
Growth in China’s exports at 46% over the last 12 months wasn’t strong enough to keep China’s trade surplus from shrinking to just $7.6 billion in February. The total trade surplus for January and February was down 50% from the same two months in 2009. (Looking at the two months together eliminates the effect of the changing timing of the weeklong Lunar New Year holiday, which fell in January in 2009 and in February in 2010.
Chinese officials, including Zhou Xiaochuan, governor of the People’s Bank of China, the country’s central bank, have been very clear in recent weeks to link any change in the renminbi/U.S. dollar peg to a sustained recovery in China’s exports. By pegging the currency to the dollar since July 2008, China has given its exporters an edge: when the dollar fell, as it did for most of that period, so did the renminbi, making Chinese goods cheaper to non-dollar, non-renminbi customers.
The good news in rising Chinese imports is that they give a boost to the economic recovery in the United States and Europe.
According to the Commerce Department, rising net exports have contributed more than a percentage point to U.S. GDP growth in the past two years.
The United States is due to report its own trade figures today, March 10. (China will report inflation numbers at 9 p.m. ET on March 10. Allowing the renminbi to appreciate would help fight inflation in China. Watch that inflation number to see how a shrinking trade surplus and rising inflation net out for the renminbi/dollar peg.)
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Remember I said several weeks ago that China buys a lot of things than we think and the tough stance in Washington is bad for American business in China. That post of mine caused a quite stir on this blog and many China-bashing comments, from Tibet, Dalai Lama to Vigor, you name it.
Jim,
I have to admit, this may be the first time in my life I ever cared about inflation in China! For once, I care about “the price of tea in China”…
Also several weeks ago I read a report on China rather raises its workers pay than letting Yuan appreciate.
Jim, your thought on that.
YX,
Agreed! We should not underestimate that trade with China is a two-way street.
OFF TOPIC—
Class action lawsuit against ORA. Anyone’s thoughts?
What share is raw materials such as iron ore, petroleum etc?
taterbug,
Here’s what concerns me about the suit:
“The investigation concerns Ormat`s February 24, 2010, announcement that the Company`s financial statements contained in its Annual Report on Form 10-K for the year ended December 31, 2008, require restatement and should no longer be relied upon. According to the announcement, through the third quarter of 2009 the Company accounted for exploration and development costs using an accounting method that was inappropriate in certain respects. The impact of the restatement is a decrease of approximately $6.2 million in net income, or $0.14 per share, during the year end and fourth quarter ended December 31, 2008, representing a reduction of 12.6% from its originally reported net income of $49.5 million in 2008 and a reduction of 53.6% from its originally reported net income of $11.6 million in the fourth quarter of 2008.”
Translation: They pulled an Enron.
georic,
I don’t understand your question?
Ed,
Do you think share holders are just not picking up on this or is it a case of there still could be a future for this company. The stock has still been making small gains back. FYI– I own shares and was going to sell at $29 but since it’s been slowly creeping back I keep hoping for a little better loss. If that makes sense.
taterbug,
Since it was a one-time occurrence (we hope), then it should be safe to hold Ormat, although I’d keep it on a short leash.
Having said that, I wouldn’t buy any more. And stick firmly to your price target.
Ed, – think georic’s questiom is what percentage of imports are raw materials?
Let’s see what Jim has to say about the situation at Ormat…
southof8, you got me right.
georic,
Breakdown of China Key Imports ’09
http://www.finanznachrichten.de/nachrichten-2010-01/15858412-table-breakdown-of-china-s-key-imports-in-2009-020.htm
Hope that answers your question. China is like an expensive piggy bank for me. I don’t know whether I should put more into it, or break it open and run with what I’ve got.
I just read a good interview with Jim Rogers, but here’s the money quote:
“I’m trying to watch the whole world. We cannot be very successful investors if we don’t know what’s going on everywhere. All of a sudden you’ll something like Iceland will show up and you’ll get killed because you didn’t know that Iceland even existed. Usually these things come out of the blue from some place we’re not thinking of.”
I recommend the rest of the interview too:
http://wallstcheatsheet.com/knowledge/interview-knowledge/exclusive-jim-rogers-is-long-the-euro/?p=7778/
While Rogers talks about the adverse aspect of getting blindsided by world events (and I agree with his statement), I prefer the more optimistic approach: There’s untapped opportunities out there. You just have to look.
Speaking of China…
I just bought China Kangtai Cactus Biotech (CKGT) at $2.19. It’s a stock that made me some money last year, and finally dropped into a price I like (although still nicely undervalued, IMO).
My target price is $2.80 before this summer.
In short, CKGT makes products from cacti. Before you say, “what’s the big deal about that?”, consider that much of China is desert land, with more of it’s farm-able land becoming desert every year.
Seriously Ed you have a great sense of humor. It seems you are suggesting how to profit from someone else’s folly or very bad central planning. Something like this has occurred before. When they noticed that birds were eating the seeds the farmers were planting, they issued a “fatwa” to kill all the birds. Unfortunately they didn’t consult with an ecologist first, and after the birds were dead, swarms of locust devoured all the crops. Should have been there to invest in a crop dusting company. But thanks for the imaginative tip.
andante,
Don’t laugh. I made money on this stock last year. If I can make money off of Chinese farmers poor agricultural skills, I will.
YX, labor costs are going up in China. On the one hand, Beijing likes this–they now they have to rebalance their economy toward consumption and toward the neglected interor regions. On the other hand it raises costs for Chinese exporters and increases the chance of inflation. Trouble is that letting the yuan appreciate would probably help with inflation and raise living standards and consumption but it would also hurt exporters. No free lunch.
I’ll post on Ormat tomorrow or Friday.
McGon,
You’re taking up too many bytes. Get your own blog.
Ed:
It’s OK with me.
Jim:
You are right that no free lunch. Choosing higher workers’ pay over Yuan appreciation maybe good for fighting “hot money”. Too much money in China now waiting for Yuan’s rise!
Shorlantanzo, thank you for the link to this blog which I didn’t know.
Amazing figures! for 2009, imports of:
iron ore: +42% in volume, -17% in value
aluminum: +164% volume, +42 value
Upside,
Unless your name is “Jim Jubak”, I’ll politely ignore you.
Good one Ed. Or I think he/she should change name to “downside”.