All eyes will be on China’s second quarter GDP numbers when they’re announced on Thursday. Will China’s economy show something like the 11.9% growth of the first quarter (Danger, Will Robinson), or a big drop to 8% (Worryingly too slow) or come in just right?
The numbers announced in the run up to the GDP report haven’t given much away.
Exports soared in June, climbing 44% from June 2009. That’s a sign that China isn’t feeling the effects of a slowdown in European economic growth. At least not yet.
Imports grew by 34.1% in June 2010 from June a year earlier. That’s down from the 48.3% growth in imports in May. Imports are an indicator of the growth of China’s domestic economy: if China’s companies and consumers are cutting back, imports will slow. So maybe this is a sign that efforts by China’s government to slow the economy are paying off.
Money supply, as measured by M2, grew by 18.5% in June from a year earlier. In other economies that would be a sign that inflation is on the way and that the economy is growing too fast. But in China the message is much more mixed since that 18.5% growth in the money supply is down from 21% year to year in May and a high of 29.7% in November 2009.
With this kind of non-trend I’d be surprised if many investors placed big bets on the direction of Chinese stocks before the report on Thursday—and maybe not even then.
Thanks Jim. Anther excellent post, as usual. Let’s hope China’s GDP comes in around the 9% range and that U.S. markets can build off this week’s bullish movement. The fact that China’s exports soared in June, likely means their largest trading partner (the U.S.) is thereby importing higher amounts of goods due to a real strengthening in the economy and consumer purchasing activity. Nevetheless, until the U.S. jobless rate significantly improves, consumers are not likely to return to their pre-2007 sentiments. On an unrelated note, China could also help themselves out by susbstantially improving their Intellectual Property Laws namely, less counterfeiting, less knock-offs, and a better patent system that would encourage U.S. companies to invest more in China with a clearer prediction of market exclusivities and patent court decisions, which might actually be ethically and reliably enforced. -Steve
I still get a kick out of “8% growth is a problem”. When China STOPS growing, THEN we have a problem.
Whatever comes out of China-No one will know the truth. The Chinese will become richer and we are becoming poorer so China is irrelevant because in the end we owe them so much that they will rule our financial future.. Why did Paulson and Bernake wake up Pres bush and the next day FNM and Freddie Mac were nationalized with $12 trillion now a debt of US govt? Can anyone argue that our grandchildren and Great Grandchildren will pay that TAB to the $1, Trillionthey let us borrow for houses to buy their products. any comments JIM?