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Yet another huge number coming out of China - consumer car demand
Some huge, hard-to-believe numbers coming from the Chinese - if I had a nickel for every time I wrote that... I could melt all those nickels, sell it on the spot market and buy enough gold to plate my new ZH decal.
But seriously - is anyone buying this? The story being put forward by the Chinese is that the government pumped in some stimulus which has been enough to get the crank rolling again and leads to statements like:
"China’s downward slide is clearly over,” said Wang Qingtao, an analyst at First Capital Securities Co. in Shenzhen.
We don't want to be the Debbie downers here but where is this demand coming from? Have Chinese consumers suddenly rationalized their government's stimuli against the precipitious declines in aggregate global demand, the drops in real income and the dismal employment picture and come up with a "buy" signal? Unless market psychology runs differently over there, we have to wonder how much stock to put in these numbers. Our frequent readers know that we typically will do a deep dive into the data but in this case, we're SOL for two reasons - 1) I don't read Chinese (raw data somewhere here) and 2) the next best thing, the Bloomberg article, is a little sparse on some of the details. For example, this little tidbit REALLY needs some explaining:
First-half sales jumped 18 percent to 6.1 million after the government cut some retail taxes and handed out vehicle subsidies in rural areas to spur demand.
Now, some retail tax cuts and vehicle subsidies to spur demand could be a harmless few percentage points here, a 0% APR or $1500 cash back there, but there is a slight possibility it could be quite a bit more drastic than that (especially in light of the strong political pressure to maintain the "all is well" message). The end message is: who really knows? Ultimately, this fails the sniff test. The "China bubble" theory is pretty well-established by this point even if the proponents have screamed themselves hoarse (your beloved correspondent included) as the SHFE runs a marathon with the bulls and this seems yet another data point to shake our heads at.
The other interesting message is that this growth in Chinese demand may have positive spillover effects into Western companies like Alcoa. Indeed, Alcoa CEO Klaus Kleinfield comments:
Alcoa, the largest U.S. aluminum producer, expects government stimulus spending in China and the U.S. to boost metal demand enough to help the company start generating cash again.
On this specific example, I would refer you to an excellent post by Macro Man who basically concludes that the better than expected news can mostly be attributed to aggressive cost cutting rather than any sustainable increase in revenue. The other alleged spillover industries are in similar straits so I won't belabor the point but suffice to say that GM is still not a good buy for the US taxpayer.
To be fair - there is a tremendous amount of latent demand in China. As the below graphic shows, Chinese demand has a long way to go before reaching an appropriate % of GDP (thanks to Brad Setser/Paul Swartz for the graphic).
However it's just too soon. This sort of macro shift cannot possibly be expected to happen in any given 3 month period and especially in the context of crappy ROW macro data (green shoots aside), it's tough to swallow. The long term story is definitely very bullish on China but only when the macro pieces are there - until then, it's a pretty tough pill.
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I can't help but wonder if kidnapping and detention are part of Chinese business tactics after the RIO manager in China disappeared last Sunday. China has confirmed that they have arrested RIO Tinto's Australian Manager in Shanghai....for being a SPY????
Stealing state secrets to be exact.
China was properly pissed off after the deal of the centruy fell through between Chinalco and Rio Tinto, with RIO joining fellow Aussie mining ginat BHP in a JV instead...
I wonder if the terms of the release of the four RIO employees will be a "hostile" takeover by Chinalco!
The charges are serious and highlight the dangers of doing business with China,
China confirms arrest of four Rio staff July 9, 2009 - 3:51PM"China's vague spying and national security laws give authorities wide latitude in deciding what to prosecute. The government treats a sweeping array of economic and other data as state secrets.
The maximum penalty for a conviction on espionage charges under Chinese law is life in prison. A formal arrest in China means an almost automatic conviction.
The Rio employees are accused of ''alleged stealing of China's state secrets,'' Xinhua said, citing state security officials in Shanghai."
http://business.theage.com.au/business/china-confirms-arrest-of-four-rio-staff-20090709-dedc.html
RMB 1.5 trillion in new Chinese lending — can we turn this thing off?July 8th, 2009 by Michael Pettis | 22 Comments | Filed in Uncategorized
I don’t have time to do a long entry today, but in my June 30 entry I marveled at the huge explosion in new lending, and claimed that credible rumors suggested that total new loans for June would be an astonishing RMB 1.2 trillion. That would bring total new lending for 2009 to RMB 7.06 trillion, nearly three times last year’s total of RMB 2.45 trillion.
http://mpettis.com/
precisely. easy money. ???? 2.0.
They are creating their own version of the US debt bubble. The liquidity is undoubtedly finding its way into their stock markets, RE, and auto "demand". An attempt by their gubmint to keep their sheeple from going batsh*t crazy and tearing things up. End of day, debt bubble collapses as they always do, and their sheeple go batsh*t crazy and tear things up.
One has wonder .. is auto production really up in China? If this growth rate is to be believed, imagine the oil market in 3 more quarters ..
This post reminds me of me-"Arts a tough pill to swallow".
On occassion I've been known to pull #s out of the air!
But this is just beyond the pale.
1stly,"China stim pack is vaporware-it incoporated there earlier planned infrastruture package"Never direct cash infussion!
2ndly,Who they selling to?North america?Kinda doubt this?
3rdly,Check the port volume-Those Empty containers are getting stacked pretty high-an incidently really cheap to buy now.
4thly;Bulk ships are tied up 4 abreast and harbors are like
mid town Manhatten parking lots on theater night!Full.
5thly,The chinese have always been great savers,they'll only
buy on a giveaway!
The numbers are contravailing-maybe something is going on there but think they're gettin out the bicycle pump and filling the tires on an innertube that needs to be patched first.Anyone say BUBBLE?
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aafsd_xfq_1s
i think there are only two plausible explanations: it's either a fraud or direct govt interference. i most certainly can easily imagine how cash subsidies are given out on the basis of these fictitious numbers, or alternatively local communist establishment is purchasing cars with bank loans. explanations by talking heads (income in xi'an and wuhan hitting that magic $5,000 level) is very bizzare - why is this happening now and not last year when the economy was booming??
i like this for example:
http://autonews.gasgoo.com/auto-news/1010486/Shenzhen-to-subsidize-buyer...
sales of BYD F3 were up 100% in May.
explain this part:
subsidies of 60% while BYD says most buyers are local govts. sounds like smth very fishy going on.
People, people, people. "Inscrutable" is the name of this movie. These all are fabrications of the highest order, but no less preposterous than the lies we are asked to believe on a daily basis ("financials will be up next week on one analysts's call for a Q2 earnings surprise from Goldman Sachs" on Bloomberg earlier today. For chrissake, Goldman, is there any chance you scum-sucking greedmeisters could just go crawl back into the fetid little stink hole you evolved from, and go stick your thumb up your ass? Is that too much to ask? But I digress.) Let's get that straight. If you think these are real statistics, you will drive yourself batshit. So many lies, so little time.
The bankrupted GM has the only profitable subsidiary doing business in China. check how well GM China subsidiary is doing shall give you some idea about the stunning car sales growth in China?