Chinese Exports Surge To Record, As Trade Surplus Comes At Almost Double The Consensus: More Bad News For US GDP?

Tyler Durden's picture

So much for China converting from an export-led economy to a consumer-driven society. In June, the Chinese trade balance soared to $22.3 billion, nearly double the consistently clueless economist consensus of $14.2
billion. The surplus was $13.1 billion the previous month and
$20 billion a year earlier. This was a result of an all time record in gross exports which hit $162 billion in June, driven by all time high exports to both the US and the EU, at $28 billion and $30.3 billion, respectively. Also, the surge in Chinese exports to the US
in June to a near record $19.1 billion (lower than just the $19.4
billion in July 2010), means that the official read of the US trade deficit which will be reported on Tuesday, will almost certainly spike, pushing GDP expectations lower yet again. This is precisely the last news China needed as the surge in new money entering the economy will merely hasten an already overheating economy, and following yesterday's announcement of June CPI coming in at 6.4%, it likely means that the PBoC's statement that inflation is now under control is full of hot air. It also likely means many more attempts at tightening are imminent: expect another RRR hike within a few weeks. Per Bloomberg: "The surplus adds to the cash flooding the economy and complicates Premier Wen Jiabao’s efforts to cool the fastest inflation in three years. Policy makers are seeking to rein in price gains that are stoking social discontent without choking off growth that’s already showing signs of slowing. “We don’t think the PBOC will halt monetary tightening soon,” said Liu Li-Gang, head of Greater China economic research at Australia & New Zealand Banking Corp. in Hong Kong. The central bank will increase bill sales to soak up the extra liquidity from the trade surplus and prevent it from boosting money supply, he said." It also likely means that repo rates and SHIBOR will continue their inexorable trek higher as the Chinese central bank is the latest to find itself between the rock of short-end liquidity constraints, and the hard place of long-term "anchored" inflation expectations.

Yet while in the past China trade has swung widely and even had trade deficits around the time of its new year, which was explained away as a one time event, June's surge in the trade surplus may also be an aberration: "China’s competitive advantage is also being tested by higher labor costs and yuan appreciation, Zheng from the customs bureau said today. Companies including Nike Inc. are switching production to Asian countries where wages are lower, contributing to the moderation in export growth. Vietnam surpassed China last year to become the biggest supplier of footwear to the world’s largest sportswear company, according to its annual report." If that is indeed the case and the politburo is simply massaging numbers to hide the drop in its export base, the adverse derivative consequences will be a lower capacity to buy both US paper and Euros: two critical ongoing events which have so far permitted the ponzi to continue as long as it has.

How about imports?

Import growth in June was held back by a 12 percent drop in net crude oil shipments, the first year-on-year decline since December, customs data show. At the same time, the average cost of crude imports in June was $110 a barrel last month compared with $77 a year earlier, the data show.

The government is cutting duties to help ease the impact on imported inflation from surging commodity prices. The finance ministry said June 24 it would remove import tariffs on diesel and jet fuel and cut levies on gasoline, fuel oil, zinc and some blended cotton fabrics effective July 1.

Higher costs are crimping profit at oil refiners and steelmakers. Angang Steel Co. said July 8 its first-half net income may have dropped 92 percent because of the “significant” increase in the price of raw materials and fuel which “substantially exceeded” the increase in selling prices.

“China has to use currency gains to curb imported inflation,” Edmond Law, deputy head of foreign exchange at BWC Capital Markets in Hong Kong, said before today’s data. “Policy makers aren’t left with many monetary tools after the recent interest-rate hike.”

The charts below summarize China's monthly trade data:

Total monthly imports and exports:

Monthly breakdown of inflation by country:

China-US trade:

China-EU trade:

And China-Rest of the World:

 

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bugs_'s picture

jobs were created somewhere

jobs were saved somewhere

stimulus worked somewhere

Problem Is's picture

On paper and B(L)S spreadsheets...

All are the divine truth...

66Sexy's picture

China should start a silver backed currency .

slewie the pi-rat's picture

and china PMI hit a 22-month low due to global slowdown?

can i hava toke of that?

Seasmoke's picture

time to learn Mandarin, Bitchezz

TruthInSunshine's picture

I have said from day one on my time on Zero Hedge that any claim that the Chinese will sacrifice employment in any meaningful way in an attempt to reduce inflation or due to external pressure (currency float) is one of the greatest myths anyone could be suckered into.

Take a look at the demographic composition of China, think about the changes taking place there, and then contemplate what the biggest risk to the government is.

If you said an uprising fueled by high and rising levels of unemployment, you win an iPad or ePad!

China's #1 goal, and it's a rational one in every sense from the central planners' perspectives, is to keep as many Chinese employed, and if that means getting into a pissing match with the U.S., so be it.

The only thing that will stop Chinese goods from flowing into the Walmarts and Targets and Best Buys of the U.S.  en masse is trade tariffs, period - of about 200% or more.

In these strange times, it's the 'free economic' policy of the U.S. Government that is KILLING U.S. based businesses hoping to sell more goods to U.S. consumers, while the 'communist' central planners in China have essentially gotten the hell out of the way of Chinese businesses wishing to do the same.

Libertarian777's picture

Doesn't that mean the price of ipad3 will be greater than ipad2? So even though it's more powerful it costs more? Isn't that inflation when looking at all goods?

Dudley is my economics hero. He understands inflation so well

66Sexy's picture

Thats why there wont be wage growth in china.

DUNTHAT's picture

Your analysis is 100 % correct. look at that chart that shows how long it is taking to recover emplyment loss in months. The last three recessions going bsck tp 1980 have been drainng permanent jobs away via the Asian Mercantile Currenecy manipulation plus the Fed's Dollar Reserve policy and its decline. All started in 1980 in earnest.

 

Nedly66's picture

Tariffs? What is this the 1930's? Even if we placed large tariffs on Chinese goods, those factories would just move to Vietnam, Thailand, or Indonesia where wages are even CHEAPER than in China. The US is the last place on earth manufacturering jobs for consumer goods and electronics would go. Not saying we don't have a problem with our balance of trade or that China is playing fair (cause they're not), but with the mobility of multi-nationals country specific tariffs are as obsolete as the typewriter as companies can just move somewhere else. End result, our balance of trade with China narrows, but remains unchanged in the aggregate, and none of those jobs end up coming back to the US.

Stuck on Zero's picture

No.  Never trade tarriffs.  Tariffs cause wars and enmity.  Use the mercantilist method.  VAT taxes, inspections, local standards, red tape, permits, requirements, trans-shipment licenses, obfuscations, slow-downs, IP exchanges, contamination embargoes, targeted investments, tax offsets, and myriad other little tricks to prevent anything from entering that you competes with your local industries.  Germany, France, Korea, Japan, China, are almost impossible to export a manufactured product to.  My company built specialized analyzers that we sold all over the U.S., Africa, Canada, South America, and Australia.  We spent a small fortune trying to crack the markets of the countries above and could not do it.  We should reciprocate in kind.

TruthInSunshine's picture

I never endorsed trade tariffs.

I simply said that's the only thing that will reduce China's willingness to absorb inflation in exchange for job losses, as it shifts the dynamic completely.

oldman's picture

Truth,

You are correct. However, the credit card debt increase might be read as the bite from the double dip that is upon us. It is a thought, at least.

If consumers are not consuming, and there is nothing to substantiate any real consumption, perhaps, we are already at some point beyond return; maybe the increase in consumer debt is desperation and not a sign of consumption. This is what this old man senses is occurring.

Everything that has been done to 'manage' and 'grow' the economy may have had the opposite effect----------we could be in the end game and the damage irreversable.

In any event, 'doing-nothing' seems to be our only answer, but probably the war machine that has buried this nation for forty years will once again be heralded as our saviour. As another voice in the wilderness there is no despair here, only a witness to this ever-so-slow train wreck.

We are more a powerful military threat than force, but economically we may have lost our seat at the table and be at the mercy of collaborating with other nations as peers. This will take a couple of decades of getting-used-to. 

The tariff play is real desparation---an admission of how desperate we are for leadership in this surrealistic landscape of negative growth. I sometimes laugh at how doing-something is so equivalent to doing-nothing.

williambanzai7's picture

That will pay for an empty building or two.

Meanwhile, the Chinese are getting read to build factories in a special development zone in Idaho. Where the fuck is that job genius Immelt?

cosmictrainwreck's picture

yeah, I read about that.... talk about a foot-hold. I asked myself how's it diff than Toyota putting plant in Alabama, say? Well, sez I, I think it's got something to do with who's an "ally"....

macholatte's picture

It's defacto colonization of various places around the world. Bail out Greece, get special immigration concessions. Build a city in the USA, get special immigration concessions.

 

These immigration laws are contained in the immigrant investor program known as EB-5.  The policy allows immigrants to become US citizens for providing for, and creating jobs in the United States.

That in itself is not disturbing, but what is of consequence is the fact that Idaho is expanding the model to allow a foreign country to create a city and economic zone based on the parameters of Chinese influence, not US sovereignty.

 

 

China seeks to build a city and economic zone in the state of Idaho
http://www.examiner.com/finance-examiner-in-national/china-seeks-to-build-a-city-and-economic-zone-the-state-of-idaho#ixzz1Ou4f7G2A

trillion_dollar_deficit's picture

Thanks for bringing this to my attention. Had not heard of it before. Its like a 21st century version of the trojan horse. How fucking stupid could we possibly be? Boggles the mind.

Fazzie's picture

 Teeing off with Obama? Just guessing.

FinalCollapse's picture

WB7- He's busy teaching Obama how to cook books, change USA into huge hedge fund, and then default. That's what they teach at Harvard, etc. 

 

snowball777's picture

$22.3 billion, nearly double the consistently clueless economist consensus of $14.2 billion

 

I don't know which is funnier...their 50% error, or your 100% error. Clueless is as clueless calculates.

Atomizer's picture

Lets just step back from this whole situation for a moment. Tomorrow, Steve Liesman will explain to the masses on a positive spin.

Sudden Debt's picture

Those charts just prove that China has imported a bit less gold and silver. That's it.

Maybe because Fort Knox is sold out?

 

Problem Is's picture

Maybe because Fort Knox is sold out of... gold plated tungsten??

Sudden Debt's picture

They still need gold to plate the tungsten right?

And tungsten doesn't come that cheap either!

 

RobotTrader's picture

I guess Lululemon outfits, Fossil watches, Ugg boots, Temper-pedic mattresses, etc. are all made in China because they are selling them hand over fist here in the states.

TruthInSunshine's picture

I envision you wearing a Lulemon outfit, with a cheap Fossil watch, clad in Ugg boots, on a Temper-pedic mattress, staring skyward at that poster of Lenny 'Nails' Dykstra (from the cover of Trader's Monthly) you hung on the ceiling of your room in your mom's basement.

dwdollar's picture

While he's doodling on his iPad and watching the same movie on Netflix for the 5th time.

TruthInSunshine's picture

That movie will undoubtedly be 'Wall Street: Money Never Sleeps.'

Robo has the entire script memorized.

Esso's picture

Sounds like you're overdosing on CNBS or something, Robobot. I remember a few years ago, Maria Bartiromo gushing breathlessly over Kimberly-Clark, or some other paper company, because they invented a dispenser that rationed toilet paper.

"Every home & business will have them. This is going to revolutionize the toilet paper industry!"

LOL! How'd that trade work out for you, genius?

FinalCollapse's picture

Just like the paperless restroom :-)

 

russwinter's picture

 

With rising wages and input cost inflation, it is hard for me to imagine that much is left that is profitable for Chinese exporters selling for US Dollars. On a personal level virtually every product I have bought in the last six months quickly frays and falls apart, so perhaps they have found the solution.   I loath going into stores and restaurants,  as the shaved coin market is running amok.  Even the cheap pizza slice at Costco has been altered enough that it is noticeable.  I leave with a bent over feeling as if something more than a prostrate exam was inserted.   They need to teach a special course at community colleges on how to survive shaved coin retailing. I think online retailing where you can’t inspect or return the product is especially vulnerable to this.

Once again hardly reported in the US MSM,  car sales in Beijing show rooms for June were indicated to be down 50% YoY. On a national level sales are down 12% and inventories swelling. [Asia Sentinel: Car Sales Off] 

 

cosmictrainwreck's picture

Why, those silly Chinamen just need more roads, highways & Interstate slabs to park those bitches on, bumper-to-bumper.... that's the way we did it, right? Out of the showroom, onto the slab. Worked out pretty good, huh? Till we ran out of space, money to buy 'em with, and a few other things

TruthInSunshine's picture

Indeed!

Japan has poured more concrete, asphalt and used more building materials than any other nation (including China) for the last 25 years, and look at what it's (not) done for their economic expansion and what it's (tragically) done to their debt-to-GDP ratio!

Paul Krugmans of the world, unite!

FinalCollapse's picture

Leave Paula alone. She is in Stockholm now, blowing the members of the Nobel Committee. 

 

ebworthen's picture

 

Once they have reduced U.S. manufacturing and our skill base to making shovels and fish tanks, China will start an expansionary war. 

We have been sold out for cheap crap at WalMart, the profits of bankers, and politicians 'careers'.

What will we do about it when they take Taiwan?  Invade the Koreas?  We will be faced with using nukes or receding into third world sunset on the British empire status.

Sooner or later China will focus discontent externally; at present they are building the manufacturing base, the workforce, and the agriculture to support their expansionary goals while simultaneously stripping the West of it's ability to produce troops and equipment.

Admiral Mullen, Chairman of the Joint Chiefs of Staff is busy kissing ass, being wined and dined at the PLA 2nd artillery campus.

http://www.bloomberg.com/news/2011-07-10/u-s-china-military-relations-vi...

PLA 2nd Artillery Corps?  "Big deal" you say?  This from Australia, who will be at the front of any Pacific battle in representing the old power of the West:

"China possesses one of the largest land-based missile forces in the world. While intercontinental ballistic missile parity with the US or the USSR was never one of the goals of the PLA during the Cold War, a rapidly modernizing 2nd Artillery Corps is becoming a far more viable international deterrent force in the current world. Capable of inundating the region surrounding China with hundreds, if not thousands, of conventional and nuclear armed missiles, the PLA's 2nd Artillery Corps deserves credit and recognition as one of the most devastating military branches found in any military worldwide."

http://www.ausairpower.net/APA-PLA-Second-Artillery-Corps.html

 

Caviar Emptor's picture

Yes, shop-till-you-drop on credit cards sure was a wonderful policy decision back in the 80s. It all hinged on exporting inflation to China and hoping they'd swallow it during their build out. Our leaders bet all the marbles on a "Consumerist Society" that makes (and learns) nothing, and is now fully import-dependent for even the most basic needs. Wow. You couldn;t have planned the end of the American era better

cosmictrainwreck's picture

And our fucking Chair of Joint Fucking Chiefs is buddy-up...why? Let me guess. "China as an ally in War on Terror". I'm gonna throw up (again). George Patton or MacArthur or any real warrior (patriot) would have insisted, upon receipt of invitation, that they kiss his roysal military ass. The fuckers in the Pentagram now are nothin' but pansy, bureacratic, paper-pushin' suck-ass potiticians & whores..... killing time to draw a pension. So PTB hope we can give policeman role to China, and sneak out, and same some money? OR WHAT?

oldman's picture

 Dear EB

"We have been sold out for cheap crap at WalMart--------"

We have sold out is more like it. Even with 'free money', 'we' choose to buy the cheapest and trashiest shit in the market place from 'them'. They bring it, we buy it---a collaboration of losers.

Sorry, this is not a personal comment but just an opportunity to spit out that 'they' we have given so much meaningless power to in order to absolve 'we' of any responsibility. It seems so much clearer each day that 'they' are the 'we'.

OK I feel much better----thanks for your post, my friend

ebworthen's picture

I hear you, true that for many, thanks.

TruthInSunshine's picture

oldman -

I truly believe we'll see sub 15,000 dollar new, well-equipped, fuel efficient, reasonably reliable, mid-sized cars imported from China, made by any of the major automakers, within a decade.

And Americans will snap them up as quickly as they have snapped up Hyundais and Kias (making Hyundai the 5th largest automaker globally, now).

Yancey Ward's picture

Clearly we need some new thinking on GDP.  I propose we count the trade deficit as a positive addition to GDP rather than the other way around.

Fazzie's picture

  Cental planners love to change rules and economic metric calulations in the middle of the game when the data makes them look bad.

  In fact if FRB members were reading your comment, I doubt they see the sarcasm and even get inspired to do something along those lines.

Yancey Ward's picture

Damnit, Fazzie!!  You are ruining my attempts at getting in on the central planning gravy train. Ixnay on the arcasmsay!!

Caviar Emptor's picture

A precarious balance. In spite of it only being 2 1/2 years into the new cycle, the classic signs of a cycle peak are appearing: surging inventories, increased layoffs, expensive commodities, big trade gaps, margin squeezes. Economists and investors won't be able to use the traditional early clues because Fed policy has decoupled them from supply/demand: the yield curve, stock market technicals etc...

But sagging global GDPs and PMIs are clear as well as inflation contagion. 

Stuck on Zero's picture

A friend of mine relocated his manufacturing plant from Los Angeles to Tianjin in China.  He could not compete with the imports.  After a year or so I asked him about his experience.  He was a bull on China.  He said that at his plant in LA there were over fifteen different languages spoken.  At his plant in China they only needed to translate into Mandarin.  In LA he was treated by every government authority like a criminal and dunned for money constantly.  He had about eight filing cabinets to hold all the permits and licenses needed to operate in California.  In China the authorities welcome his factory and extend every help possible.  One drawer suffices for paperwork.  It's a few years hence now and he's still bullish on China but he said it's getting more expensive.

Problem Is's picture

It's a damn good thing Obama Bin Lyin' has been doubling US exports over the next 5 years, starting back in January 2010...

geno-econ's picture

Complete flip-flop.  More than sixty years ago the "developed nations" {US} were amassing huge trade surpluses exporting agricultural products and manufactured goods to war ravaged Europe and the "underdeveloped nations". Now the same "developed nations" are experiencing huge trade and budget deficits with the "underdeveloped nations" having achieved "developing nations " status, are building huge surpluses.  So who have benefited and who are now losing? Answer is labor in "developed nations" lose because under capitalism the only remaining comparative advantage over time is cheap labor---and thats in China, India, Vietnam etc.  As far as other winners?  Bankers, wealthied class holding on , a few entepreneurs and multinational corporations milking the system dry.

For US ,it cannot end well and thats the truth in sunshine