Visualizing China's Chain Reaction

Tyler Durden's picture


As the saying goes, when China sneezes, the rest of the world catches the cold. So far, if one were to look at the macro-economic surprise indices for US, Europe, and China, it would appear that China's weakness was largely ignored by US and Europe which have notably 'outperformed' relative to expectations in the last two months. However, what is apparent is that this is a lead-lag relationship which the FT provides an excellent flow chart of how China's dominant ebbs and flows chain-react around the world's supply (and demand) chains. Furthermore, the successive peaks in economic cycles since 2009 have been lower and lower as even relatively minor shifts in China's domestic production, stockpiling, or spending can have big impacts on the other side of the world. As the IMF notes: "China can transmit real shocks widely, whether these originate domestically or elsewhere."

China's ECO Surprise Index is rolling over and has tended to turn with or before Europe and US ECO Surprise indices...


As The FT's Jamil Anderlini notes:

The rapid integration that has made China a driver of the global economy also means that a fall in the breakneck pace of growth will have a profound effect on the rest of us. Just half a century ago, 36m people died in the country and few outsiders heard about it. Today, when China’s nouveaux riches buy fewer cars and handbags, the rest of the world pays attention.


The Global Impact of China's Slowdown


Source: Bloomberg and FT

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Thu, 10/25/2012 - 13:48 | 2919066 billsykes
billsykes's picture

"As the saying goes, when China sneezes, the rest of the world catches the cold"


No it doesn't it used to be the USA sneezes. 

When the USA shits its pants, ....... something something, they invade someone.


But really China is only going to grow at 8% and its demand for luxuary goods is only going to be a 15% improvement. Just terrible numbers (Sarc), not a negitive % in the bunch.

Thu, 10/25/2012 - 13:56 | 2919106 Beam Me Up Scotty
Beam Me Up Scotty's picture

Whew, you scared me there.  I was visualizing a nuclear chain reaction for a second.  Or is that coming later?

Thu, 10/25/2012 - 14:45 | 2919266 fuu
fuu's picture

That would be Japan.

Thu, 10/25/2012 - 14:05 | 2919141 KingTut
KingTut's picture

If you want to believe the numbers published by a communist government about to transition, then be my guest. What they publish is total crap, but no one knows what the real numbers are. Electricity usage went up around 1%, which tells me what I want to know.

Thu, 10/25/2012 - 14:22 | 2919179 ParkAveFlasher
ParkAveFlasher's picture

"Electricity usage went up around 1%..."

Rooks rike Wong left the air conditioner on over Shengzen province in Jury.  Sirry Wong!!!

[edit: "...reft..."]

Thu, 10/25/2012 - 14:20 | 2919194 Skateboarder
Skateboarder's picture

Excuse me good pharaoh, but Chinese RecDep issues only the most reliable and up-to-date information.

Now you best drop that piece of paper you're holding into a memory hole on your way out. There, all better.

Thu, 10/25/2012 - 15:11 | 2919352 JosephConrad
JosephConrad's picture

As long as the U.S. & E.U. Banker Elites keep looting, pillaging and plunding 3rd. World, Resources-Rich Non-White Nation like THIEVING CONQUISTADOR and doing NOTHING with their 'ill-gotten gain', China and the World Economics will stagnate/decline.

The U.S. and Surrogates (ISRAEL & others) are creatign NOTHING and relying on CHAOS and Middle-East/Africa/S. American LOTTING and GENOCIDE rather than Goods Production by their citizens to keep their economies afloot - oh yes, and printing bird-cage liner paper money to create the illusion of wealth. U.S. empire building, thuggery and chaos is destroying Economic Growth & Production & Poliical Peace. Net result? The Elites are thriving and THE 99% ARE DYING faster eaqch year. The answer is clear...The survival of the plane and the sovereignty of nations demands China, Russia, war-tron nations and poverty-stricken ones TURN THEIR BACKS on the last Warrior Nation - the United States. Only then will World Eco growth cease to be an issue. But the U.S. would rather TAKE DOWN THE WORLD than have peace on it!

Thu, 10/25/2012 - 13:47 | 2919074 fonzannoon
fonzannoon's picture

MSM horseshit news of the day.

"Consumers and firms put money back into Spanish and Greek banks in September, European Central Bank data showed, ending a run of declines driven by concerns about both countries' finances."

Thu, 10/25/2012 - 14:05 | 2919140 NotApplicable
NotApplicable's picture

So... Corzine got his new hedge fund up and running?

Thu, 10/25/2012 - 13:48 | 2919079 LawsofPhysics
LawsofPhysics's picture

Mechantilists trying to follow infinite eCONomic models/monetary policy in a finite world.  This should end well.

Thu, 10/25/2012 - 13:50 | 2919090 Kurpak
Kurpak's picture
Confucius say...  Wise man buy prunes...get good run for money
Thu, 10/25/2012 - 13:52 | 2919094 lolmao500
lolmao500's picture

Would still be bullish for western bonds...

Thu, 10/25/2012 - 13:53 | 2919095 bigdumbnugly
bigdumbnugly's picture

first chart misleading.

it's really just a 'how to' primer of a properly executed chinese fire drill.

Thu, 10/25/2012 - 13:52 | 2919096 Yen Cross
Thu, 10/25/2012 - 13:53 | 2919104 davidsmith
davidsmith's picture

I couldn't sleep last night, but this article did the trick.  Thanks!

Thu, 10/25/2012 - 13:57 | 2919112 Cognitive Dissonance
Cognitive Dissonance's picture

They're all beginning to look alike to me.

<The dips/recessions/depression.....not the Chinese.>

Thu, 10/25/2012 - 13:58 | 2919115 JPM Hater001
JPM Hater001's picture

China is contracting at about 3-5%.  Their numbers make Baghdad Bob blush.

We are close.  Very Very Close.

Thu, 10/25/2012 - 14:28 | 2919203 Cognitive Dissonance
Cognitive Dissonance's picture

Leadership in quasi democratic dictatorships is usually rotated out of "office" by the king's court just about when the fecal matter hits the fan. That way the "new" leadership can tell the people that those who caused the current problems are all gone and "we" just got don't blame us. Here in the USA we have institutionalized it with "elections" every two, four and six years.

Works every time.

<Welcome to the new plantation.....pretty much the same as the old plantation.>

Thu, 10/25/2012 - 14:02 | 2919129 Peter Pan
Peter Pan's picture

The Chinese leadership are worried beyond belief. They and their cronies have been shifting huge wealth outside the country in expectation of some real turmoil. Just keep an eye on Chinese food inflation and electricity consmption.

Thu, 10/25/2012 - 14:05 | 2919136 Dr. Engali
Dr. Engali's picture

" Just half a century ago, 36m people died in the country and few outsiders heard about it. Today, when China’s nouveaux riches buy fewer cars and handbags, the rest of the world pays attention"



                          Nothing good can come out of this when  we sell out our soul just to make a buck.

Thu, 10/25/2012 - 14:31 | 2919220 Cognitive Dissonance
Cognitive Dissonance's picture

How much for my liver?

<I'm holding out for it's weight in Gold squared.>

Thu, 10/25/2012 - 14:36 | 2919237 JPM Hater001
JPM Hater001's picture

I said this a few months ago and got down arrowed to death ;( but I was in Bejing before the Olympics and I have never met a people where questioning was bred out.

Thu, 10/25/2012 - 14:15 | 2919176 Canucklehead
Canucklehead's picture

Is the ECO Surpise Index any different than the EASI?  I hear that this proprietary ECO Surprise Index is highly correlated (and lags) Mark to Sanchez's passing percentage statistic.

What happens to China's ECO Surprise Index when Tebow starts?  The world wants to know.

Thu, 10/25/2012 - 14:21 | 2919198 FreeSlave
Thu, 10/25/2012 - 14:29 | 2919217 JuliaS
JuliaS's picture

Robin Williams: "China has the bomb. Or maybe they just have one billion people go "Boom"!"

Chinese boom, alright.

Thu, 10/25/2012 - 14:35 | 2919235 slackrabbit
slackrabbit's picture

lol "As the saying goes, when China sneezes, the rest of the world catches the cold"

You watched the movie Looper then?

hint - the assasins get paid in Silver bars and cash their silver in Chinese yuan.

The USA is broke and violent - China not so much.

The irony isn't lost on a ZH reader or PM fan etc.

Thu, 10/25/2012 - 21:09 | 2920350 nastaking
nastaking's picture

Less than eight months after Apple launched the  x18 tablet 8GB (called the "new iPad"), the company has confined that model to the history books by unveiling a fourth generation version.

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