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China’s Trade and Manufacturing Flourish … While America’s Tanks

George Washington's picture




 

U.S. manufacturing has shrunk to a 3-year low.

Business Insider notes:

As we wrote earlier, one of the big stories from today’s PMI (Purchasing Managers Index – a primary measure of a country’s manufacturing activity) reports was the strength of the BRICS. China, Brazil, South Africa, India, and Indonesia all turned in good reports.

 

Europe was stable too. Eurozone PMI hit its highest level in 8 months.

And this time it was the U.S. ISM report that laid a brick, with the headline number going sub-50 (signaling contraction) and various sub-indices doing poorly.

 

Whereas the rest of the world is now on an up-tick in momentum, it appears that the U.S. (perhaps due to a combination of Cliff worries and Sandy) is seeing a rough patch.

 

Earlier today, we posted a couple of sentences from SocGen analyst Kit Juckes. The gist was: The China hard landing risk was coming off the table, the Euro crisis was fading, and now the last risk was the U.S. and the cliff.

 

Juckes wrote:

An optimist will tell me that at 50.6 China’s manufacturing PMI is at its highest level since April, a pessimist will point out that it’s barely above 50. But the ‘tail risk’ of an imminent hard landing for the Chinese economy is fading, just as the conclusion of the latest Greek drama means that risk of a return to full-blown Euro Zone crisis is fading. So, two of three major risks are reduced, leaving only the dreaded ‘fiscal cliff’ to worry about.

And in a must-read article, AP analyzes IMF data on 180 nations’ trade with China – and concludes that China has surpassed America as the world’s “top global trader”:

As recently as 2006, the U.S. was the larger trading partner for 127 countries, versus just 70 for China. By last year the two had clearly traded places: 124 countries for China, 76 for the U.S.

 

***

 

Despite China’s now-slowing economy, its share of world output and trade is expected to keep rising, with growth forecast at up to 8 percent a year over the next decade, far above U.S. and European levels.

 

***

 

The United States is still the world’s biggest importer, but China is gaining. It was a bigger market than the United States for 77 countries in 2011, up from 20 in 2000, according to the AP analysis.

 

***

 

The United States still does more trade overall – but just barely. If the trend continues, China will push past the U.S. this year, a remarkable feat for a country so poor 30 years ago that the average person had never talked on a telephone.

 

***

 

China resumed its upward trajectory in the last two years. Even with key Western markets in a slump, exports are up 58 percent since 2009. Imports are up an even sharper 73 percent.

Indeed, some claim that China is already the world’s biggest economy.

Postscript: While the U.S. has launched wars all over the world to seize control of resources, China has quietly been trading for its needs, or mining or building resources itself for subsequent export.  See this, this and this. No wonder China is surpassing the U.S. as the world's trading giant.

And the only healthy sector of U.S. manufacturing is military.  But wars are bad for the economy … and we may be headed in the wrong direction.

Another difference between the U.S. and China: derivatives, which Warren Buffet called "weapons of mass destruction". Their  unregulated use were largely responsible for the 2008 crisis.  China never allowed derivatives to the extent the U.S. did, and reined in derivatives somewhat (here, here, here and here) during the economic crisis. On the other hand, U.S. banks have increased their derivatives exposure - with government backing - and are massively manipulating the derivatives markets.  Given that derivatives are inherently destabilizing for the economy, this only hurts the U.S.

For a contrary view, see this and this.

 

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Tue, 12/04/2012 - 09:38 | 3032064 chinaboy
chinaboy's picture

Numbers fluctuate. But there is no scientific indication of flourish. It is Wall street and main stream media's make believe.

Tue, 12/04/2012 - 09:09 | 3031983 disabledvet
disabledvet's picture

Long Flextronics and "Contract Manufacturing." Global Capital is STILL the big winner...and the idea that because you make something "you win" (unless it's a tank or an aircraft carrier) is total b.s. China is being scammed just like everyone else...the end of the debt Supercycle is nigh.

Tue, 12/04/2012 - 09:05 | 3031975 mrktwtch2
mrktwtch2's picture

sorry but i dont trust any figures from a communist country..china will be in a major revolution in the next 16 months as there "fake" economy implodes..it will get so unstable that us companies will bring manufacturing back here..just want it noted that i predicted this..also if things are so great why is the shanghi index  back at the lows of 09??

Mon, 12/03/2012 - 23:51 | 3031618 plata pura
plata pura's picture

protectionism

Mon, 12/03/2012 - 22:51 | 3031483 Oldwood
Oldwood's picture

 There is a lot of productivity gained in a society that operates without a safety net.

Tue, 12/04/2012 - 06:39 | 3031847 GoNavy
GoNavy's picture

...AND at the end of the barrel of a gun.

 

The policymakers who pushed the notion of more trade with China after the massacre at Tiananmen Square as a means of increasing freedom there must be chagrined to see that China's market power has muzzled criticism of China's brutality (and even exported it) among the political leaders of the countries that hope to export to it.

 

Tue, 12/04/2012 - 09:35 | 3032052 lakecity55
lakecity55's picture

.....so, China gets Manufacturing, and we get NDAA.

 

What a trade.

Mon, 12/03/2012 - 21:21 | 3031288 are we there yet
are we there yet's picture

China and emerging markets do not have our accelerating entitelments and extreme debt. Also they do not have Obama.

Tue, 12/04/2012 - 00:32 | 3031670 HurricaneSeason
HurricaneSeason's picture

They also work for $250-$500 a month.

Tue, 12/04/2012 - 05:08 | 3031816 Parrotile
Parrotile's picture

They can "get away with" lower wages, because the average person's cost of living is pretty miniscule, AND they still are far, far behind the West in the "entitlement mindset".

Wonder just how much profit is re-inveted vs. back-handed to the elite? Even with the stated degree of corruption in China, there still seems to be far more reinvestment than in, say, Australia (which isn't a great comparison, but does give an overall "feel" for what's going on).

Tue, 12/04/2012 - 02:09 | 3031736 Transformer
Transformer's picture

Yes, they work for $5-800 a month.  But an apartment costs $11-15 a month.  China is not what you think.  I have a good friend who just spent a year and half living there.  Their standard of living is not a whole lot less than ours, especially with our economy tanking.  They are almost more free than we are.  They don't have TSA groping you at the airport.  And the amount of regulation of all things business is much less.

Tue, 12/04/2012 - 09:29 | 3032030 lakecity55
lakecity55's picture

They don't need the Twinks Searching Asses agency in China. Step out of line, get a bullet in the back of the head. Keeps a lot of people cool.

Tue, 12/04/2012 - 06:48 | 3031853 GoNavy
GoNavy's picture

They don't have the TSA groping their people because they imprison (or execute) virtually anyone who might give off even a whiff of trouble.

A good friend of mine was on the executive protection detail for the State Department Security Service (basically the "Secret Service" for the State Department.)  He said foreign travel was always risky and they were always on heightened alert --- EXCEPT in China.  Society is so tightly controlled there that, aside from Chinese surveillance and their attempts to recruit American spies from State Department personnel, trips there were basically a milk run.

Mon, 12/03/2012 - 22:46 | 3031473 walküre
walküre's picture

How many trinkets can the poor population in the favelas of Rio or the lower and lowest cast of the Hindus afford? Maybe they don't have entitlements in those places but they sure as heck don't have a large group of insatiable and debt enabled consumers. Brazil has a so so middle class. They're survival is solely dependent on the commodity trade with China. The BRICS can sustain each other for a bit but the trade volume is never going to match the trade they've all lost when the US and Europe imploded. Past tense because it's already a done deal.

Tue, 12/04/2012 - 06:58 | 3031858 GoNavy
GoNavy's picture

China's renminbi manipulations (you know, the one Obama/Geithner refuse to acknowledge) help ensure that there will be no middle class rising in India, South Asia, or Brazil  Employment that would have moved to those countries years ago but for the under-valued renminbi have remained in China to maintain stable employment and to boost the Chinese living standard higher than where it would otherwise be.

If you have high unemployment and totalitarian control you have Egypt, so letting China manipulate their currency keeps China's Commuist leadership in place.

 

 

Mon, 12/03/2012 - 20:09 | 3031155 rsnoble
rsnoble's picture

Rough patch??? lmao.  The only rough patches are the ones that aren't well oiled with BULLSHIT and you stick and scrap off all your knee skin before resuming freefall.  Fuck the US gov't.

Mon, 12/03/2012 - 19:23 | 3031095 ozziindaus
ozziindaus's picture

So now that we are on an even playing field, let's go to war! Makes you think this was part of the plan to begin with which conveniently coincides well with the defunct cold war. 

Mon, 12/03/2012 - 17:32 | 3030832 Jim in MN
Jim in MN's picture

Youse guys should read The Next Convergence by Mike Spence.  Solid look at the arrival of the next billion middle class folks and how in the Hell it could all fit together.  It is a doable thing....if.................

But, IMHO Spence underestimates the power of corruption to make happy endings into sad ones.

Our corruption AND Chinese corruption.  That's the real enemy.

Mon, 12/03/2012 - 17:48 | 3030884 George Washington
George Washington's picture

Agreed ... I just added this:

 

For a contrary view, see this and this.

Mon, 12/03/2012 - 17:02 | 3030713 williambanzai7
williambanzai7's picture

SEASONS GREETNGS AMERICAN CHAMBER

Mon, 12/03/2012 - 18:31 | 3030991 Uncle Remus
Uncle Remus's picture

Xi! Xi! Xi! Merry Consumerist.

Mon, 12/03/2012 - 22:39 | 3031009 TruthInSunshine
TruthInSunshine's picture

Global Shipbuilding Outlook – 45% of Shipyards Have No Orders

 

Sector Consolidation and Restructuring to Continue


 For the small shipyards in Korea, China, and Japan the painful industry restructuring that started in 2010 is expected to continue as shipyards struggle with lack of orders and tight financing. Despite very low ship prices, shipowners expect prices to fall further due to competition among yards as 45% of global shipyards have no orders to work on post-2012. This means finances of small shipyards are likely to deteriorate further and banks might be unwilling to issue refund guarantees to them, starting a negative feedback cycle.

Mon, 12/03/2012 - 17:15 | 3030776 George Washington
George Washington's picture

Funniest thing I've seen in a while!

Mon, 12/03/2012 - 17:10 | 3030755 akak
akak's picture

A most excellent display of Chinese Citizenism communaughty spirit!

Minor details such as dog-wokking, Tibetan blobbing-up and roadside turdery would be embarrassing to Communist Sharty Central Committee --- must focus on redness and Mousy Tongue of Long March of Insanitation fabled past.

Mon, 12/03/2012 - 16:53 | 3030698 imapopulistnow
imapopulistnow's picture

One nation's exports is another nation's manufacturing base.

China continues to promote exports while domestic demand stagnates.  For example, recent article in China Daily stated washing machine exports up 18% while domestic sales were unchanged yoy.

China is simply too big to play the emerging nation development game of subsidized exporting.  They have 4x the population of the USA and 2x that of the USA and Europe combined. They simply have too large of a labor force and hence devour too much, too quickly of the manufacturing base of the developed world.

Certainly automation is playing a big role in job losses particularly in manufacturing, but so too are China's mercantile polices.

Mon, 12/03/2012 - 22:32 | 3031450 Omen IV
Omen IV's picture

MERCANTILISM  the only solution for eec and usa

Mon, 12/03/2012 - 16:43 | 3030659 woggie
woggie's picture

the beast is on the gobble
and all that matters is we're all headed for it's belly
http://youtu.be/ntmthFyaYzY

Mon, 12/03/2012 - 17:07 | 3030740 Pool Shark
Mon, 12/03/2012 - 17:06 | 3030574 falak pema
falak pema's picture

no its comparitive advantage is its dynamics and the US has only one thing to export : its oligarchs; all super rich; whereas the chinese have their  army of ants and their rising oligarchy class; double whammy. They have all bases covered, both home and export.

China is basing its economic model on providing lo-cost "fixed advantages"; cheap labour, no labour laws, cheap land, along with "mobile advantages"; export products anywhere, cheap money via currency war, selective rapid flow of capital for/from its oligarchy class for capital investment inside as outside world wide.

Its got both mobility and entrenched protective barriers, it has national and international trump cards.

Its weaknesses : rigidity of political system, social explosivity, opaque economy, lack of energy/RM, potential RE bubbles. 

Its global dynamics are better than first world's, that is its biggest comparitive advantage, its hungry and climbing up. 

Can the US turn its economy around before China becomes lead player? Hummm....

Mon, 12/03/2012 - 15:57 | 3030507 Frastric
Frastric's picture

1. Chinese economical indices can't be trusted.

2. The USA is recoupling with the global slowdown in growth.

3. European manufacturing has undergone a dead cat bounce.

4. 2013 will probably see deeper negative territory for the respective Chinese, USA and European PMIs.

5. Benny and Mario will fix everything.

Tue, 12/04/2012 - 08:14 | 3031900 jeff montanye
jeff montanye's picture

i'm thinking your number three is a good bet.  the hardest part of the post above for me to buy was "the conclusion of the latest Greek drama means that risk of a return to full-blown Euro Zone crisis is fading."

how did that work exactly?  because the greek bonds now pay less interest (and, soon, principal)?  because the estimated deficit reduction is now further in the future?  because now over fifty percent of young greeks are unemployed?

http://www.zerohedge.com/news/2012-11-24/greek-debt-buyback-boondoggle-q...

Mon, 12/03/2012 - 15:52 | 3030490 LawsofPhysics
LawsofPhysics's picture

Right, because everyone is telling the truth.  In that case, I am sure China won't mind paying for American commodities with gold.  Sounds good to me, bring it.

Tue, 12/04/2012 - 01:44 | 3031717 philipat
philipat's picture

Oh yeah? And which commodities would those be ? Get it straight, China is importing Gold, not exporting it. It doesn't import much in the way of commodities from The US and can source commodities from anywhere. That's why they are called commodities. Dream on.

Tue, 12/04/2012 - 10:05 | 3032154 LawsofPhysics
LawsofPhysics's picture

The U.S. still has plenty of coal, oil, and natural gas.  The U.S. also has agriculture.  What?  Last time I checked the Chinese still like to eat, and there are plenty of them to feed dipshit.  Moreover, why didn't you address the issue of China lying?  Why?  because you know they are, that is what state-run communist countries do (just like the U.S.).

Mon, 12/03/2012 - 15:49 | 3030483 Everybodys All ...
Everybodys All American's picture

and it's a deliberate policy. The New World Order believes it's better to see a weeker America and it's being implemented by our Commerce Department.

Mon, 12/03/2012 - 16:59 | 3030708 Urban Redneck
Urban Redneck's picture

The NWO crowd is agnostic to whether "America" is weaker or stronger, their only concern is that the NWO crowd gains power and wealth.

That is their nature.

If "globalization" acquires a distinctly anti-NWO flavor they will adjust their objective accordingly...

Mon, 12/03/2012 - 16:10 | 3030541 Pool Shark
Pool Shark's picture

 

 

It's easy to build infrastructure with slave labor; just ask the Egyptians about those pyramids...

 

Tue, 12/04/2012 - 00:03 | 3031638 DaveyJones
DaveyJones's picture

the US is working on it

Tue, 12/04/2012 - 04:29 | 3031803 old naughty
old naughty's picture

"It's easy to build infrastructure with slave labor..."

Well, China is to begin lego-building 2.4 floor per day for the world's newest tallest building of 220 storey with 220,000 tons of steel (and a sh't load of central planning money):

http://www.caseyresearch.com/cdd/latest-worlds-tallest-building-boondoggle

I wonder why the rush, to finish it March 2013?

...in time for ?

 

Tue, 12/04/2012 - 05:27 | 3031823 Parrotile
Parrotile's picture

Seeing as the occupants could (if they chose to) live their entire lives without leaving this building, just maybe the Chinese have an eye on future space exploration and planetary colonisation.

Construct a terrestrial "prototype" and use this to iron out all the psychological and operational problems associated with a "lifetime's voluntary incarceration". Presumably this concept can already scale to a "multigenerational" living environment, so there's the possibility that information gained from running this "mini-City" might be very relevant to any community planning a long-distance (i.e. interstellar) mission.

Of course there's also the possibility that the Chinese are doing this for entirely different reasons, which may be revealed at some future date. Must say the manufacturing precision on this scale is pretty tight, and shows how far Chinese manufacturing capability has moved in the past decade.

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