No signs that China’s economy is slowing down in these numbers.
China’s imports jumped a record 86% in January from the same month in 2009. This increase, the third straight monthly climb, far outstripped a 21% increase in exports. The growth in exports, however, was the second monthly increase after 13 monthly declines.
One great big caveat—with lion dancers and fire crackers: Lunar New Year, which fell in January last year, falls in February in 2010. So a lot of economic activity that was postponed by the holiday last year wound up in January’s monthly numbers this year. (For more on the Lunar New Year’s effect see my post https://jubakpicks.com/2010/02/08/forget-the-january-effect-this-year-watch-the-lunar-new-year-effect/ )
The jump in Chinese imports is a boon for China’s trading partners from next door to across the globe.
 Taiwan posted its biggest jump in exports in 30 years in January. China’s imports from Germany climbed by 50% in the month from January 2009.
Import growth will eclipse export growth for all of 2010, according to Nomura Holdings. The investment company projects that China’s imports will grow by 20% in 2010 and exports will increase by 11%.
Because of the distorting influence of the Lunar New Year policy and because the Beijing government is inherently and rightfully cautious about doing anything that might damage growth, I don’t expect that these numbers will lead to any immediate change in China’s currency policy. And Beijing is still waiting to see what effect its most recent commands to suspend bank lending will have on an economy that after reporting 10.7% growth in the fourth quarter of 2009 showed signs of overheating. (For more on how command economics work and don’t work in China see my post https://jubakpicks.com/2010/01/28/the-rout-in-global-stocks-is-a-tempest-in-the-teapot-of-chinas-command-economy/ ) Â
I still think the most likely timing of any change—from a decision to end an absolute renminbi-U.S. dollar currency peg to more shifts favoring domestic consumption—is in the days after the March meeting of the National Peoples Congress and before state visit of China’s leaders to Washington now scheduled for April.
Also looks better for China/Taiwan relations.
China removed restrictions on foreign investments in chip tech. TSM immediately announced expansion, updating their Chinese mfg plant to higher technology (28 nano) and to settle a legal dispute they recieved 10% of a Chinese chip mfg (MCI or something like that). Looks like China does realize the importance of other mfg strength within their borders. My feeling is another step AWAY from isolationism. TSM also doubled revenues in Jan compared to last Jan. @ these prices could be a very good play on Asian mfg growth.
I’ll take that as a compliment!
Ed, you are one funny dude.
Iran permanently suspends Gmail (in order to develop a state email that it can monitor). Guess they are not as advanced as the Chinese in blocking/reading email and internet traffic. This could happen in China, it is a dictatorship afterall. And also why I am leery of investing in Chinese companies.
http://online.wsj.com/article/SB10001424052748704140104575057621649270154.html?mod=WSJ_hp_mostpop_read
FYI: I am increasing my position in UCO (double long on crude oil) based on potential activity between Israel and Iran:
http://www.rightsidenews.com/201002108618/editorial/israeli-warships-en-route-to-the-persian-gulf.html
There are three certainties in life: death, taxes, and trouble in the Middle East!
China is, and probably always will be a tricky place to invest, for all the reasons you imply.
China news . . . China news . . .
I’ve been thingking about “Blade Runner,” the biggest prpaganda film for the late-20th century “Yellow Peril” xenophobia. It’s still called “the best sci-fi ever made.” I’d say its fans then are conservatives of today.
China’s January Loans Surge as Property Prices Climb (Update2)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aEmKOfd5Upjk&pos=1
Dj, interesting link. Its ending notes, as Jim has repeatedly, the basic problem of investing based on what appears to be happening in China, and that is, it’s impossible to know whether what China says is happening is actually happening, and if so, whether it is happening for the same reasons one could deduce if it was happening in other than a command economy. The post notes a 25% drop in iron imports, and speculates on whether it could be to improve their nationally owned companies’ bargaining positions in iron ore pricing negotiations. That is a reasonable reason. It could also be because they have replenished supplies in the orgy of late 2009 buying. It could also be to deflect attention from the charges leveled against the RTP employees (about which Australia is urging “transparency”— good luck on that wish), which China would want to do if it believes, as most commentators have posited, that the episode will make RTP, Vale and BHP less likely to allow the Chinese to take the lead on setting annual prices as opposed to the Koreans or the Japanese.
My point- speculating about what the chinese are doing or why is great fun, but not real useful as an investor, becuase a command economy is run by dictators. It might be they’re benevolent, or even brilliant economists- but its still a dictatorship that can change its mind on a dime, for reasons having nothing to do with economics, and that makes it a dangerous place in which to invest, or from which to borrow money. And XY, while my mortgage lender can cancel my loan (please God, make it happen), it actually doing so is exceedingly unlikely as I would have zero incentive to pay it back were it to do so, so not sure of the connection between credit card debt, U.S. gov. bond debt, and mortgage debt.
If I walk from my home and my mortgage, it is only my problem to the extent I have equity. If I don’t, why keep pumping money down the toilet to live in my house at 2 or 3 times what I could get equivelent housing for if I rented the house next door? This is particularly true if I never had put any money down.
It is imminently rational to walk away from underwater mortgages; the banks just don’t want you to do that because they’d rather hope and pray rather than manage and sell. Ask the Tishmans. (though its the rare borrower who can put down 100 million on a 5.6 billion purchase, borrowing the remaining 5.5 billion, which were the terms the WSJ noted Tishman obtained in purchasing Stuy Town and the village next to it.)
CHINESE IRON AND STEEL MARKET
Chinese iron ore imports, steel exports slow
Iron ore imports fell 25% while steel exports saw an end to a seven-month rising trend.
http://www.mineweb.com/mineweb/view/mineweb/en/page39?oid=97789&sn=Detail&pid=39
YX,
Agreed.
ed:
That’s my point. US needs to think through before act.
YX,
I wouldn’t call the PLA general’s call as “laughable”, especially when you consider the Chinese are far more willing to use economic warfare. While that general may not have any economic say, and I don’t consider his comments “actionable”, I do think the U.S. should at least stop and think about it.
That’s why I posted comments several days ago that the tightening in China is necessary, therefore investors need not to be panic.
I also said in another posting that China imports a lot of things than we think and US needs to maintain a good relationship with China. All the tough stances from Washington hurt US sales in China. That comments caused a quite debate on this site including China-bashings on things from Tibet to Uigur to Dalai Lama, etc. Here we are. China is not only world’s largest exporter but also a very BIG importer unlike Japan, Korea and Germany which only want to export! It’s extremely hard to understand why someone wants to be tough on his largest creditor and customer. I know these days many people hate bankers. You may scream at them (bankers in general) as hard as you want, but not the one who holds you mortgage note and credit card. He can cancel it at any time.
Speaking of that (canceling your loan or credit card), the universal “wisdom” in America apparently is that if you borrow $100K from a bank, that’s your problem. But if borrow $100M from a bank, that’s the bank’s problem. Many WISE Americans now are applying that wisdom to China’s holding of US Treasury, etc. I have not seen anyone challenging that wisdom, I may not be the most qualified one, but will give a shot.
Firstly, just asking millions of homeowner whose mortgage are under water or houses have been foreclosed, whose problem is that? Don’t the homeowners have a problem too? A big one.
Secondly, the Chinese may not think that way, if you borrow too much, it’s your bankers problem, if they sell US treasury, it will lower the value of their assets, etc. My guess is that to the Chinese, their US Treasury holdings are already money out of their hands. They will loose no matter what they do, sell or to be paid by inflated dollar. They wish they had not bought so much US treasuries, but things had been done. Their biggest fear is NOT loosing value of their assets, but loosing the US market. As long as US is China’s market, China will act prudenly. If continuously holding the US treasury would help US consumer to buy Chinese goods, they’ll hold it. Other than that, they may not think the way American thinks. Additionally, yesterday’s report about the PLA general’s call of selling US bond, although laughable, can not be totally ignored, particularly if the next Chinese leader is perceived weak in front of the military.
Ed:
On #2… I think Iran has bought Yahoo since they are shutting down Gmail. Next up… the Ayatolah takes down his Facebook page or Iran changes its status to “Real Democracy”.
I must admit, today has been one of the dullest market days I’ve seen in awhile. I don’t even have to look at the volume numbers to know it’s been a low volume day. Here are a few tongue-in cheek theories on why:
1. Bernanke’s statement, when played backwards, proclaims “I am God”. A wily hedge fund manager, who dropped too much acid in the 60’s, figured this out, and is travelling to Iran to take part in their surprise announcement tomorrow.
2. Speaking of Iran, their Thursday surprise announcement is they have bought Apple. Of course, this means the new iPad will only allow you to read the Koran.
3. The Chinese are holding all of the Goldman Sachs fund managers prisoner.
4. With President Obama, Congress, and the entire federal government snowed in, there’s nothing for the Bears to worry about, and the Bulls can’t get any TARP money to buy stocks.
5. All the people who would be trading stocks today are still partying in New Orleans.
gotta love it
“”We don’t think the dollar rally is going to last much beyond the first quarter because we’re in a new world of rotating sovereign crises where politics matters again. It’s Greece right now but it could be the UK next, and then US which has yet to take any steps at all to tackle it fiscal deficit,” he said. ”
Thats from Run26.2 link above…
Run26.2,
That’s what I like about China. They think like I do on economic matters.
China Orders Retreat from Risky Assets: http://www.telegraph.co.uk/finance/china-business/7205110/China-orders-retreat-from-risky-assets.html
BEIJING (Reuters) – China has indicted four employees of Anglo-Australian mining giant Rio Tinto on charges of bribery and stealing business secrets, setting the stage for a trial in the case that has jangled investor nerves.
http://www.reuters.com/article/idUSTRE6191QZ20100210