First it was a sudden bout of tightening following a series of record liquidity withdrawing repos, then it was two disappointing PMIs, then it was a warning that China's property market is (as usual) overheating and major curbs were being implemented, then it was China's "state of the union" address in which the country trimmed substantially its outlook for the remainder of the year, predicting well below trendline economic growth, inflation and credit expansion, then we got an absolute collapse in Chinese imports indicating the domestic economy had gone into a state of if not shock then outright stasis, and finally overnight we got an update on China's retail sales and industrial output which both had their weakest combined start to a year since the global recession in 2009, leading Bloomberg to title its summary article, "China’s Economic Data Show Weakest Start Since 2009", and further adding that the data is now "adding to signs of a moderating rebound in the world’s second-biggest economy." Luckily, in the new batshit normal, who needs the fastest growing marginal economy: the weight of the growing world can obviously be dumped on the shoulders of the savings-less, part-time working US consumer, accountable for 70% of US GDP, and thus about 20% of the global economy. What can possibly go wrong?
Retail sales increased 12.3 percent in the first two months of 2013 from a year earlier and industrial production rose 9.9 percent, the National Bureau of Statistics said yesterday in Beijing. Both numbers trailed economists’ estimates. The gain in retail sales was below the lowest economist projection of 13.8 percent and was the smallest for a January- February period since 2004. The increase in factory output compared with the 10.6 percent median estimate in a Bloomberg survey and was the weakest for the first two months since 2009.
The moderation in sales follows a crackdown by new Communist Party chief Xi Jinping on lavish spending by government officials and state-owned companies, part of efforts to curb corruption and waste. Catering sales growth slowed to 8.4 percent from 13.3 percent in the same period last year, statistics bureau data show.
What's worse, and the true unspoken message here, is that the global liquidity tsunami is merely flooding China with hot money, which the local central bank and now Politburo are increasingly more vocally standing up against. At this rate we give China at most a few months before it makes it all too clear to the desperate G-7 central planners that the time for printing is over, and if they want China to play ball the printers will stop.
February inflation, distorted by a weeklong holiday, accelerated to 3.2 percent.
“The time is still way off for an explicit policy change” such as raising interest rates or banks’ reserve requirements, Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, said in a note. The recovery is being led by “fast investment growth” and “could falter once monetary policy becomes tight on concerns of rising risks of inflation” and a property bubble.
The statistics bureau doesn’t break out figures for January and February retail sales and industrial output in an attempt to smooth distortions caused by the timing of the Lunar New Year holiday.
Only in China will 6% food inflation be considered "tame"
Food prices increased 6 percent in February from a year earlier, down from 10.5 percent in the holiday month in January 2012, government data show.
What about those soaring exports which surprised everyone and resulted in a trade surplus in a month which traditionally has seen a deficit? Well, as Sean Corrigan shows, exports to China's second most important trading partner, the US, are now the lowest they have ever been as a percentage of total.
This begs the question: just who is doing all the importing in a time when every economy is supposedly running up a trade surplus? Has Bernanke found a way to monetize all imports now?
And for some parting words on this deja 2011-vu conundrum when it was spiking Chinese inflation which once again derailed the global reflation party, here is, once again Diapason:
Much of the week has been an exercise in Google-translated rune?reading from China’s ongoing ‘Two Meetings’ at which the formal handover of power will be effected. L Largely monopolized so far by the outgoing crew, we have to wonder whether Wen Jibao’s effusiveness reflects policy as it will be or simply a wistful, legacy?minded expression of policy as it should have been.
For what it’s worth, there has been plenty of open criticism of the GDP?at?all?costs model and some frank recognition of the scale of the malinvestment already in place. For example, NDRC chairman Zhang Ping candidly admitted that ‘a rising number’ of heavy industries were making losses and ‘lamented’ the overcapacity in steel, aluminium, cement, glass making and coking coal.
Plants in these sectors, he said, were running at just 70?75% of capacity, while the once booming solar industry was at just 60%. To address their ‘huge difficulties’, Zhang said he was pushing to increase the pace of mergers in these sectors, but also confessed that such an approach has had ‘little success’ in recent years.
The financial flipside to this was made plain by Li Yining, professor at Beijing University, who warned a CPPCC press conference of nothing less than ‘a possible financial collapse caused by overinvestment amid the country’s new urbanization wave.’ ? you know, the same ’wave’ on which all the CCP’s hopes are being pinned for the coming years?
In the midst of this, we were treated to the release of the Chinese trade numbers for February which, for reasons of LNY calendar variability, are best combined with those for January when we attempt to gauge the state of play. Intriguingly, imports— not the least imports for number of key commodities, such as copper, iron ore, and oil—were relatively subdued and hence, in keeping with anaemic showing of neighbouring Korea and Taiwan. But, despite this, exports took a major jump, rising by almost a quarter on the same two months of 2012.
How did that happen? Has China suddenly and dramatically reduced the contribution of foreign inputs to its output? Was this a staggered liquidation ofproduct built up in QIV’s hot-housed burst of activity? Or was it perhaps an exercise in good, old fashioned, tax and subsidy arbitrage and/or chicanery aimed at evading the current account restrictions?
We ask this because, although they, too, rose in absolute terms, exports bound for the United States—after all, the fastest growing of all the large, net?deficit economies—fell to a modern?era record low share while those to Hong Kong soared 60% to a new outright and relative share high. At the same time, the country saw record foreign exchange inflows of more than $100 billion— a marked contrast to last year’s hefty drain of hot money. Not coincidentally, this was a period in which the traditional speculative vehicles, the markets for stock and property, both, were on a violent upward tear.
Were exports—possibly overinvoiced—again being used to wash funds through the somewhat porous capital account barrier, picking up tax rebates, with notional ownership about to change to something ostensibly foreign?owned and based in a foreign tax haven when and if they are subsequently re?imported in the coming months?
Was this a means to exploit the yen’s twice?in?a-lifetime rate of decline by clandestinely borrowing some of that excess valuation in Abe?san’s fast depreciating currency?
We have no way of knowing, of course, but we remain duly suspicious.
With all that duly noted, and with the question pending of how the world will "grow" when the biggest marginal economy, China, is now openly using the T(ightening) word, we can't help but be thoroughly amused how the latest meme spreading among the lemmingeraty, aka Wall Street sellside propaganda, is one guaranteeing the return of the "strong-dollar" paradigm. You know: the currency of the central bank which is diluting its base money by a little under 3% every month! That strong dollar.
... But hey, look over there: it's a record Dow Jones! Are you not entertained yet?