China's 2009 Trade Surplus Falls A Record $100 Billion

Tyler Durden's picture

After posting a record crude-oil import month in December, as well as the second highest iron-ore import month in history, China's program economy is roaring back to life, even if the imports are actually sitting in full warehouses, used to build empty cities that consume negative electricity, make washing machines that never launder anything except the government's flawed economic statistics, and create cars that somehow use up ever-less gasoline. Of course, when the government has trillions in increasingly worthless excess dollar foreign reserves that have to be used up for something, it is no wonder that the Chinese government is buying anything and everything it can stockpile, and that can't be devalued by Tim Geithner, hand over fist. As for exports: courtesy of the dollar peg, which makes China's exports as cheap as the US' (assuming the latter had much of anything to export besides financial innovation), China had no shortage of counterparties to purchase its $1.2 trillion in 2009 exports. Yet despite all this, China's trade surplus plunged a record $100 billion, or 34%, to $196 billion from 2008's $296 billion.

Notably, in December China's crude-oil imports hit a record 21.26 million metric tons, or 5 million barrels per day. It is good that at least for one country the "great recession" never happened. In 2009, China imported 14% more oil than in 2008, for a total of 204 million tons. But the real kicker was in iron-ore imports which was 62.16 million metric tons in December, 22% more than November, and an unbelievable 80% more than a year earlier, and the second highest ever recorded. For all of 2009 628 million tons of iron were imported, 41.6% higher than in 2008. Those empty cities apparently really need more peers. And one wonders why Australia's (5.4% more imports in 2009) and Brazil's (5.3% less) economy are humming: it takes a lot to provide the raw materials to build the biggest bubble in the world.

The simple observation is that instead of having to finance the US consumer's continued spending binge by buying hundreds of billions in Treasuries in 2009, China was let off the hook by the Federal Reserve, which did all of its mandated purchase instead. So with all the excess money China went and stockpiled, stockpiled, stockpiled. Now the only question of whether the required end-consumer demand will ever materialize will determine who is correct in the China bubble debate: Chanos or Rogers. As the US consumers are tapped out (save for some Spanish tourists who apparently can't wait to purchase g-strings at A&F), China better hope its own middle class will use its savings to buy everything the government has already made and built, and counted (hopefully not double or triple) in its GDP calculation.

On the other hand, despite having a savings rate that Americans could only dream of, China is also gripped by gambling fever: who really knows what the domestic balance sheet looks like. Yes, having cash is great, but if the liability side of the consumer balance sheet has 0 equity (or only equity in a massively inflated stock market) and the rest are cheap loans, which the government handed out freely in 2009 to the tune of 11 trillion renminbi, then all bets really are off when the profit taking inevitably begins (as it always does).

Here are some more charts that demonstrate why the traditional Chinese model of an export-led economy may be in trouble if the US and EU consumers don't come back (as a reference point, exports to the EU dropped 19.4% or $236 billion, while those targeted at the US sank by $221 billion or 12.5%).

The chart below demonstrates the phenomenal rise in China's trade surplus, which was effectuated primarily on the backs of the US and EU consumers, who had found themselves big spenders in the years after 2003 courtesy of the HELOC piggybank, a surging stock market, and low interest rates.

What is very amusing on the above chart is the massive surge in China's trade balance in the months following the Lehman bankruptcy. Truly with the rest of the world shut down for the subsequent quarter, China was exporting excess billions of "stuff" to somebody. Who that somebody was, would be interesting to find out. Had the export data been normalized for the October-February period, $85 billion in GDP would have been removed from the Chinese economy. Yet what is glaringly obvious is that China will have a very tough time at recreating the same surge in the trade surplus in 2010 and onward, especially if calls for renminbi appreciation continue growing ever louder.

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CB's picture

Perhaps China, in desperation for someone to consume all their crap, would eventually force their people out of their savings and assets in order to keep their fun scheme going.

Chopshop's picture

like explicitly producing inflationary pressures through warp-speed printing presses, the stockpiling of a war chest o' natural resources ... promoting egregious leverage by any and all and then introducing margin / futures.  nah, they'd never do that.

merehuman's picture

speaking of war chest, china has it. And they have millions of unemployed single men.

China has warned the USA 6 times in 7 days to not sell weapons to Taiwan.

The contract to sell patriot missiles has been approved by our government.

China may have reason for that war chest they been compiling.

Seer's picture

The amount of money that China spends on "defense" is a drop in the bucket compared to what the US is spending.  And, given the chess match that is on (http://www.atimes.com/atimes/Middle_East/LA09Ak02.html) it's clear that China has reason to worry; I mean, not only does the US owe it a ton of money, but it looks like the US is most certain to default on such debt (one way or another), meaning that the US will likely do everything in its power to initiate some military conflict.

Ever since the world has become depedent upon oil its wars have been about oil (in one way or another).  Power needs POWER, and oil IS that power!

Stink_Pickle's picture

CB,

Would this even be possible?  I was under the assumption most of Chinese savings was going for personal retirement in a country where there are not social welfare or entitlement programs.  If my assumptions are true, forcing their people to spend would lead to more and more social unrest as retirees would literally have nothing. 

Seer's picture

Exactly!

No, China is using its national wealth to party on at the moment.  As the general populace gets hooked on partying, the expansive move toward a US lifestyle (the car culture), it will become harder and harder to maintain the party.  Substitute "bubble" for "party" and you get the idea- eventually KABOOM!

Uprising are far more likely in China than the US.  Which goes to show you who has the greater State control (police state): no wonder TPTB don't like commie China!

CB's picture

Dear Mister Stink_Pickle: 

You might be right.  China is very *SPECIAL*.  The nature of central banking and the politics of the power-hungry don't apply, just like here in the US.

Sincerely yours,

CB

anynonmous's picture

Michael Pettis (China Financial Markets) published an outstanding essay yesterday

 

Everyone wants to talk about currencies

 

ThreeTrees's picture

Interesting article!  It makes me wonder if the US is really where eyes should be focused when trying to detect a destabilizing currency crisis...

Anonymous's picture

Thanks for a very interesting and well-reasoned read. Had read some of his stuff on other sides, but had not visited his. I will be going back to read more.

deadhead's picture

An outstanding opening paragraph!  Laughed my stones off.

Great article, good insights, I'm going with Chanos.

Also, Goldman's China affiliate is going retail as reported recently by B'berg.

Also, China to approve futures trading and short selling.

Ergo, vampire squid tentacles successfully extending.

Anonymous's picture

I think that whoever writes these articles needs to tear themselves away from their charts and eMail, and then spend some time travelling thru China. What you'll find is a massive domestic economy driven by huge urban centers filled with HUNDRED MILLIONS of middle-class workers who, so unlike their Western counterparts, carry little or no debt. What you'll also see are shopping malls packed with people, new high-rise condos that are indeed being quickly bought-up, and brand new upper-middle class "suburbs" filled with upscale Chinese. What you should also note is that every Chinese household is loaded with appliances all of which are manufactured in China, not to mention the other domestic manufacturing industries (autos, drugs, etc). While real estate in some China cities is indeed a large bubble, the Chinese economy is for-real and will continue to thrive even after the US and the other bankrupt western economies go down the toilet. Soon, the most powerful currency in the world will feature a picture of Chairman Mao, so take that you capitalist pigs!

Kayman's picture

Hey there Anonymous 189204 China Apologist.  Your description of China sounds a lot like America over the last decade.  Your time is short my friend, so enjoy the ride to the top of the bubble; it is a long and terrible ride to the bottom.

You were trained to Kow-Tow.  We, the West, were brought up to innovate, question and fight.

If you are not a coward, hiding behind your Anonymity, why not write an article for your local paper criticizing your Communist Fascist Masters.  I could be a little bit of fun... No....?

 

 

 

Anonymous's picture

FYI Kayman, I'm an American who happens to be married to a Chinese national - a position that has given me a unique opportunity to experience both countries in all their "glory". So, please save the American rah-rah BS for your next American Legion meeting. Also, I'll take the Chinese Communist Fascist masters over the US Corporate Fascist Masters - any day!

waterdog's picture

Hey Anon, your are just the person I want to talk to. You have a good look into China. Tell me, how do Chinese look into each others eyes as they kill ever infant girl born until the wife finally produces a boy? I mean, is it accepted and expected, or does it just happen and get swept under the rice mats?

MsCreant's picture

waterdog,

Your posts are typically fine, I typically find you reasonable or certainly neutral. This one is off topic and offensive. What ever we believe, why target this poster for this?

Reductio ad Absurdum's picture

On the contrary, waterdog hit the nail on the head --- it is your post that is inappropriate.

As for the anonymous coward, I only wish we could deport him to China and make his fondest wish come true. He does not deserve the freedoms that other people won for him with their blood.

Kayman's picture

Eugenics- it worked for Hitler, and China copies.  Murdering your female children is part of the greater economic plan.

It is spot on topic.

Anonymous's picture

yeah and it works great here too - how many millions
of babies are aborted in the usa each year for
some greater good which only a cretin like you
could observe...eugenics is alive and well here...

too bad you can't be aborted for the eugenic
good..

merehuman's picture

and we are so willing to send our young to war!  Given a choice of abortion or war, i would say , abort me. It beats having to go to Iraq and kill folks who done me and mine no harm.

MsCreant's picture

I apologize. You are conscious of what you are doing. You want to escalate a verbal engagement with a Troll. After you bring up infanticide, I wonder which of our cultural practices the Troll will bring up? I'll go get pop corn, come back, and watch him manipulate us.

Beer or wine anyone?

Carry on.

Seer's picture

Here in the US it's accomplished via the life-sucking insurance companies.

And, not to be an apologist for the eugenics crowd, but I hardly see babies of the rich being under threat of termination.  Also, for whatever it's worth, I'd think that folks in the US should be a bit more receptive of the notion of reduced population growth in China; at 1.3 billion people China is building momentum to eat the US's lunch; increased population will only mean a greater necessity to compete harder (finish the lunch).

Ah, but this right-to-life stuff is such good diversionary play...

Thanks for playing!

Anonymous's picture

i would love to deport your reductio ad
absurdum ass to western china...you have such
a low rent intellect it defies the imaginatin
how you managed to find this site....

merehuman's picture

Is it a requirement for americans to be assholes?  just asken

Anonymous's picture

Eugenics, worked for Hitler, works for China. Why is it off topic ? Part of the Chinese "miracle" is murdering their female offspring.

Distasteful, Horrible, but not off topic.

merehuman's picture

while here at home tent cities spring up as a reply to bankers take home pay.

Here in the USA freedom was exported till there is little left.

Our future dreams will be in a nightmare reality.

We have no room to put anyone down as long as we are to cowardly and greedy to stand up to OUR masters.

Anonymous's picture

I don't attend American Legion meetings, but I am certain you are afraid to say anything negative about your Chinese Masters. Since you say your spouse is a Chinese National, you know full well her relatives in China are at risk if you say anything at all about the Chinese Fascists.

You also know you cannot wander around China footloose and fancy-free, because there is an ugly side of China, hidden behind a dark curtain of Chinese agents.

China is the modern-day version of Nazi Germany- a purported miracle, but really a financial and political illusion. Without the American consumer buying all the crap from China, there will be no China.

As far as the US Corporate Fascist Masters go- they created modern day China, and I am working as hard as I can to get rid of these myopic whores. In America the Middle Class can vote.

Fortunately for the Western World, we have a history of throwing off the chains of those who think they have some omnipotent power. In November every incumbent politician will be defeated.

China on the other hand, has centuries of masters, mandarins and slaves. No history of democracy whatsoever.

Good luck my friend. When are you moving to China ? I will help you pack. I hear there are millions of empty containers you can choose from...

Kayman

Anonymous's picture

amerika is a modern day version of nazi germany -
a financial illusion where citizens are raped of
their incomes to support plutocrats and the
government is in the hands of a powerful and blood
thirsty military-cia....money is redistributed
at will and taxes levied to fight wars of imperial
aggression....

in fact amerika imported thousands of nazi criminals
to build up programs such as mk-ultra (operation
artichoke), to murder heads of state both domestic
and foreign, and create a state of perma war with
a totalitarian regime of dhs, tsa, fema, and other
statist solutions to your imaginary problems...

your stupid fucktarded notion about being able to
vote here is a supreme testament to your imbecility....
voting here is a mirage just like your fucktarded
iq is....you are the reason why the world holds
amerika in contempt....you are a total fool...

merehuman's picture

Thats about nailed it. Thanks

merehuman's picture

Same people who re elected Geoge Bush, cant be too smart. Sorry is my hostility showing? apologies all around.

Still, cant we be better than this? Dont our cops abuse our protestors,?

Do our politicians mind us? You truly believe a new crew in washington wont be bought and paid for before they take the oath?

 

musth's picture

China will be a capitalist society soon enough. When? Who knows, but if history still rhymes China will be a capitalist society. You think all of the new rich capitalist of China are gonna put up with being oppressed for another 200 years?

Seer's picture

I thought that China was presently operating in a more capitalistic manner than the US.

But that last line: You think all of the new rich capitalist of China are gonna put up with being oppressed for another 200 years?  What the heck?  Please explain to me how this ISN'T horrible logic?  I mean, you've got NEW and 200 years in the same sentence!  Further, they can hardly be assumed to be oppressed if then are/become "rich."  NOTE: when 2/3 of the world population lives on $3/day or less do you really want to stand out like a sore thumb?  The meek shall inherit the earth...

Anonymous's picture

why don't you write an article on how fucking
retarded you are?

Kayman's picture

Mukka Hai, geoung

Anonymous's picture

"We, the West, were brought up to innovate, question and fight."

The west that gave goldman and co billions and billions of $$?

Really?

Kayman's picture

Do not forget my little anonymous 189318 friend, that the American people had the gun put to their head by Bernanke and Paulson in the Fall of 2008- that is the only reason these cheating weasles got the billions. Why, even our squeaky clean, new savior supported giving the crooked banks- taxpayers money. 

There is a lot more going on than writing here on ZeroHedge, but it is certainly a way to communicate, since the MSM, like (most of) our politicians have been bought and paid for.

This fight is not over, not by a long shot.

Anonymous's picture

the fight was over in the 1950s...fucktards like
you think you have government by the people...and
carry on with little boy bravado....

your cia bosses made sure that democracy ended
with your ged-intellect voting to spend its wealth to fight
every boogey man, communist, and terrorist it
could invent to expand the blood thirsty war
state....and then expanding the police state...

you got a gun to your head? why were you so stupid
to be in that position? and why did you flinch?
what good did your stupid little democracy do then?

china and the usa are morally equivalent -
totalitarian, lying states ruled by thugs...and
you do a great job defending the bullshit....

there is no self government in amerika because
asswipes like you can't think...

Seer's picture

The fundamental problem, one that causes numerous people problems in argument, is that the US system is an oymoron- a "representative democracy."  This system has allowed the common person to feel like he/she is participating, when in reality they are just giving their consent to their political mob bosses: kind of like how the US Congress abdicates is constiutional mandate to declare war (giving it to the Executive).  Like all centralized systems, the US will vanish in corruption.  China's government too will fail, as will just about all others.  And lest people go all giddy over this prospect thinking that it'll free up "business," capitalism too will die a horrible death- when it can no longer grow (due to exhaustion of physical resources): capitalism is the most efficient economic system ever, so efficient it is building it's own perfect noose by which it will hang itself.

Thanks for playing!

Anonymous's picture

it takes a pig to know a pig....

on the other hand there is a strong and well
reasoned school of opinion sharing your observations
on china....i think you are more right than wrong...

on the other hand there can be no doubt that
chinese economic statistics are obscure at best
and completely at odds with usa definitions of
gdp - i.e. production rather than sales = gdp....i
believe that chinese numbers are as managed and
as deceitful as american....

yet i think your empirical observations deserve
great attention and should some how be reconciled
with the nay sayer reports....there is probably
truth in both camps - you can't paint an accurate
picture with anecdote nor can you rely on official
statistics....

the oil imports are an excellent example....was the
oil imported for stockpiling or for use in commercial
activity? i am thinking more of the latter....

the world's plutocrats made the decision long ago
to evacuate the usa in favor of china....as such
i think the naysayers have an extremely difficult
burden of proof and case....america is in the final
stages of decapitalization and will face an enormously
difficult century if it survives....i am very
pessimistic about the health of america - let alone
pre-eminence - for the remainder of this century...

all policies are deliberately destructive to
american interests....it cannot survive with its
present government...

deadhead's picture

China is aggressively building oil storage facilities.

i don't know if the recent imports are going to immediate use or stockpiling or both, no way of knowing as they lie even more than the u.s. gov't.

Anonymous's picture

they are getting ready for war....

Wondering's picture

Please look up the last decade of defense spending by China.

Please look up the last decade of defense spending by the USA.

We can debate tons of things about China. The idea that they are militarily ready to fight or capable of fighting the USA anytime soon is not one of them that can be debated rationally.

Yes, if some one was to invade them by land they would be able to defend their nation relatively easily. Same is true for the USA.

Seer's picture

no way of knowing as they lie even more than the u.s. gov't

As you believe, but... if both lie, then how can you determine to what extent?  Seems no more than chest beating (my flag is better than yours; my pony is faster than yours, though no race ever takes place).

The oil aspect is key, however.  I have been bringing this up for, well, way too long now (though just a recent comer here).  This bolsters my argument that the US cannot dig its way out of debt via exports (which then means that it cannot dig its way out, period) because the need to import ever-greater amounts of oil (which is the energy to create).

Commie/China haters can rejoice in the knowledge that China is going to crumble (at least as far as being a big market player goes).  But, this exact same mechanism also applies to the US.  See: corner, back'd in to...

Thanks for playing!

Anonymous's picture

Development is a piece of cake when somebody else did the legwork and when the term "intellectual property" is not in the vocabulary. Then when you add the "Chinese Touch" (lead paint, melamine)...Bingo! 8.8888888% growth.

Question: how long does $2 trillion in FX reserves last when the trade surplus is tumbling, the stimulus is 13% of GDP and 40% of bank loans are non-performing? Oh, and divide that by 1.35 billion souls.

Kung hei fat choy!

deadhead's picture

I would add to that, from what I have gathered at least, that Chinese local gov'ts are swamped with debt due to the central gov't forcing their hand to finance many activities. 

Anonymous's picture

I think the China surplus driven trade can go for 2 to 3 years. The best bets are to invest around China, not in it.

Anonymous's picture

The "legwork" you have in mind in the USA is not done by americans, they are done by ethnic Indians, Taiwanese, Chinese and scientists from other countries. Go take a walk in Silicon Valley or Google or Apple's R&D labs and speak to the people. Chances are 99% of the people who did the work are not born in America. Sad, by a fact that many chauvinists here deny.

ThreeTrees's picture

Never mind the fact that the vast majority of China is still made up of poor backwater rural communities...

merehuman's picture

trees...  China is building cars and roads, which leads to gas stations and shops, which create employment which bring workers which brings motes which.... 1950 usa looks to be a parallel. That growth may balance out some other problems. So many people will be buying a lot  of things.

Seer's picture

Yeah, and they've been able to exist in a subsistence lifestyle for quite some time.  Let's see how well Americans are able to adapt!

Motral of story: don't think that anyone who isn't reliant upon unsustainable practices is backward. (reminds me of "liberal" types making fun of rural folks- bad idea!)

Thanks for playing!