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September China Imports Surge To Record, As Trade Surplus Drops, Misses Consensus
China released its September trade balance data, which at $16.9 billion, missed expectations of $17.8 billion, and was a sizable drop from the $20 billion in recorded in August, however was a 30.5% increase from a year ago. The reason for the sequential drop in the number was due to imports which at $128.1 billion surged to an all time high. This being China, of course, it was offset by a surge in exports to its two main export markets: the US and EU. US exports, much to the protectionists' chagrin, came at the second highest on record, or $27 billion, even as imports also grow marginally to $9 billion (see charts below). The the export saving grace was Europe, which imported $28.8 billion worth of Chinese goods, for a trade surplus (from the Chinese perspective) of $14.9 billion: the highest since the Lehman collapse. And confirming that September was a very much trade driven month, the gross notional trade balance with the Rest of the World (ex US and EU), surged to a record $99.7 billion ($44.1 billion in exports and $55.6 billion in imports, both at near or fresh record levels). The ongoing trade surplus will surely lead to more calls for Yuan revaluation, which of course simply means CNY-USD unpegging, as the CNY continues to benefit mostly to the Fed's ongoing devaluation of the dollar. How this is lost on our Congress critters and Senators is beyond us. Want CNY revaluation? Stop killing the dollar. And due to to traditional pick up in the trade surplus in the month of October, we expect screams for trade war to get ever louder next month once a fresh record Chinese export number is posted.
Some more observations on the trade deficit number from Bloomberg:
U.S. Treasury Secretary Timothy F. Geithner yesterday suggested that China’s yuan policy is distorting the global currency system by forcing other emerging market countries to intervene. Yuan forwards traded near a two-year high today on anticipation Premier Wen Jiabao will allow greater gains and signs the Federal Reserve may inject more U.S. stimulus, a move that could spur capital flows to Asia.
Today’s numbers are “unlikely to do much to reduce international pressure on China to move faster on the currency,” said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong. “Beijing has plenty of scope to allow appreciation in the months ahead.”
European and U.S. officials argue that a stronger Chinese currency would aid the global recovery by stoking demand within the nation and reducing international economic imbalances. China’s gross domestic product expanded 10.3 percent in the second quarter as the economy replaced Japan’s as the world’s second-biggest.
“What’s happening is, as China holds its currency down, their currencies are moving up,” Geithner said in an interview on “Charlie Rose” scheduled to air yesterday on PBS and today on Bloomberg Television, referring to other emerging markets’ exchange rates. Other nations “are having to work very hard to make sure they’re not at an unfair disadvantage with China.”
Actually - completely wrong! All China is doing is piggybacking, very prudently, on the US destruction of its own currency. After all there is that little thing called the USD peg. But we wouldn't expect Geithner to either understand the truth, or much less, present it to the peasants. After all it would be then confirmed that the main reason why US exporters are increasingly obsolete is not due to the Chinese monetary intervention, but that of the Chairman himself.
And here are some pretty charts showing the Chine trade surplus on a monthly basis:
Total monthly China trade balance:
Monthly trade balance by key export and import partners:
China trade balance with the US:
China trade balance with the EU:
China trade balance with the Rest of the World:
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OH MY GOD!!! APPLE WILL MISS CONSENSUS?!!
And $300 is now in the rear view mirror.
Welcome to Cramerica.
Looking forward to the iFoodStamp app.
Finally, someone who can spot a trend;)
And hopefully can make a few BB devalued $$ from it.
And of course Apple can't miss expectations (they are always laughably low); until they do.
Miss Consensus....isn't she the new CNBCer with the poofy blond helmet hair and the pouty mouth? yen!
Between QE2 and foreclosure moratorium its all good baby buy em!
Trying to take the heat out of an economic system where China always wins paying a $ a day.
Maybe China is buying real assets with their fiat dollars before the dollar is worthless.
Currency trades are for suckers. Whatever the exchange rate is today it will be different tomorrow. FX traders need love, too. They also need Porsches.
Watch the crude/dollar trade, instead. Crude is high and cannot provide returns at this price level. Dropping crude prices means increasing dollar value. It's Bernanke v. Nature.
This is actually good for world trade and US economy.
Sorry Tylers, but it is becoming increasingly apparent that the endgame for monetary policy is geopolitical in nature and that is to put more pressure on China's rebalancing efforts. That includes a cheaper USD as an offset to labor arbitrage and the effects of an abject materialistic import binge driven in large part by US multinationals and short term profiteering. Such a rebalancing will have long term implications. For the immediate future, a cheaper dollar while RMB remains "pegged" is simmering the stew of global impatience with China's monetary policy ...
The scapegoating effect in the press and pols is a side effect. This may create problems down the road but is still more of a side show.
If you will recall, China officially was off of the USD peg in 2005, but its FX interventions have de facto reinstituted it.
The Chinese people have effectively had $2.65 trillion picked from their pockets, more than 50% of GDP. Since aggregate demand in the West is unsustainable, wouldn't the Chinese do best for the Chinese by improving their own people's lot in life? Why is so much captial flowing from emerging markets to developed? Can't people in emerging markets use that money? Or perhaps this is simply western hegemonic thinking on my part ... although Confucian thought, beyond the CCP hyperbole, places major emphasis on the individual as the ethical base of community. The Nobel laureate buried in a jail cell is a symptom of pathology within China's very own moral / ethical / political terrain and history.
If individuals became more accountable in the US, then they would understand that cheap goods is not the nec plus ultra of a happy and balanced life or community ... Spend more time w/ Thomas Jefferson, less time with Dancing with the Stars ...
"Why is so much captial flowing from emerging markets to developed? Can't people in emerging markets use that money? Or perhaps this is simply western hegemonic thinking on my part ... although Confucian thought, beyond the CCP hyperbole, places major emphasis on the individual as the ethical base of community. The Nobel laureate buried in a jail cell is a symptom of pathology within China's very own moral / ethical / political terrain and history."
Excellent questions. Perhaps because a lot of Chinese are Taoists as well? (jk) Seriously, though: intriguing.
As for the "Nobel Laureate buried in a jail cell"... well, let's just say "take great care in which direction you aim that high-powered US judgement drone."
Regards
Bernanke and Geitner are between a rock (potentially revolutionary, inpatient, entitled populace) and a hard place (economic reality that the American empire is crumbling).
China imports raw materials to build up infrastructure and produce manufactured goods to the Europe and America.
Americans put gas in the tank, put in 8 hours at their extend and pretend jobs, drive to Wal-Mart, buy cheap stuff from China, and grab a Happy Meal from the drive-up window on the way back to their under-water house.
How long can this charade last?
The US (Geithner, Bernanke et al) don't like the fact that they've been able to swagger and bully most countries (see what's happening in Brazil and others for an example of how the new carry trade is causing asset inflation) and they have now come across someone that they can't...
All China has to do is NOTHING. America is destroying itself (and, I have to say, here in the UK we're not far behind with talk this week of the BofE doing more QE) and shafting its population.
DavidC
The article requires me to believe official Chinese statistics when I cannot even believe my own government's - any government's.
Really this is a great post from an expert and thank you very much for sharing this valuable information with us.
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