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The Hard Landing Continues: China Trade Date Disappoints Amid Weak Demand
On Thursday, Goldman suggested that the combination of soft commodity markets and the Chinese transition from investment to consumption will weigh on dry bulk trade — and by extension, on shipping rates — until at least 2020. This assessment served to validate a theme we’ve been pushing for quite some time. Namely, that although a global supply glut caused by overly optimistic assumptions about both China’s economy and about central banks’ collective ability to engineer a robust post-crisis recovery has without question weighed on shipping rates, the more fundamental problem lies on the demand side and you can’t mention sluggish demand without discussing China. Here is how we summarized the situation:
Meanwhile, we’ve exhaustively documented the laundry list of signs that point to dramtically decelerating economic growth in China, including falling metals demand, collapsing rail freight volume, slumping exports, a war on pollution that may cost the country 40% in industrial production terms, and, most recently, a demographic shift that’s set to trigger a wholesale reversal of the factors which contributed to the country’s meteoric rise. All of this means that the world’s once-reliable engine of demand is set to stall in the years ahead.
Overnight, we got still more evidence of China’s hard landing when trade data for April missed estimates across the board as exports slumped more than 6% on the heels of March’s abysmal 15% decline and imports fell 16%. The data seems to point to lackluster demand both domestically and abroad, and as BNP notes, it’s not the yuan’s dollar link that’s weighing on trade — it’s demand.
Via BNP:
The April external trade data disappointed market again. Exports growth remains in negative territory, despite the decline has to some extent narrowed. The market consensus had expected a moderate recovery of export in April, mainly due to the favourable base effect. The decline in imports growth has further deteriorated in April, which has mirrored the lacklustre domestic aggregate demand.
The export weakness was still broad based for almost all trading partners. Export to US increased by 3.1% y/y, compared to 8% decline in March. It might reflect the demand from US has slightly recovered after a soft growth Q1 momentum. The decline in export to EU narrowed to -10.4% y/y from -19% y/y in March; Exports to Japan and ASEAN countries decreased by -13.3% y/y and -6.6% y/y, respectively, from -24.8% and -9.3% in last months.
The decline in imports growth expanded to 16.1% y/y, from 12.3% drop in March. The soft international commodity prices continue to drag the import growth. In the first four months, crude oil import plunged by 43.1% y/y at value, despite the imported volume has increased by 7.8% y/y. Imports in iron ore and coal also plunged by 44.8% and 49.7%, respectively.
In first four months, the total external trade declined by -7.3% y/y, which has been significantly lower than the official external trade target for 2015 at 6%.
Net exports rose to USD 34.1bn, from an average of USD 21.1bn in the three months before.
It is clear that the correction in external trade cannot be easily explained by the CNY distortion factor. The exports would be more struggling from the soft demands from the major trade partners and deteriorating international competitiveness in the low end manufacturing sector.
And as we discussed in detail in “How Beijing Is Responding To A Soaring Dollar, And Why QE In China Is Now Inevitable”, it’s not as simple as devaluing the yuan to boost exports when you’ve witnessed $300 billion in capital outflows over the past four quarters alone and so we’ll leave you with the following which can be summed up as simply as “between a rock and a hard place.”
The government should already clearly realize the further downward pressure of the foreign trade. But we still maintain the view that the governments would be reluctant to allow an aggressive RMB depreciation to stimulate the export.
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Is this yet again another buying opportunity?
1/3rd of all global credit (debt) creation since '07 was due to China...all net increase in oil consumption was China...on and on. And now the last bastion of credit growth (the Chinese housing bubble) is dead. The only tool left for all nations, advanced and developing, to maintain demand is more credit via QE. Prepare for global hyperinflation...and global depression to follow.
http://econimica.blogspot.com/2015/03/are-seeds-of-depression-sprouting.html
And a view of how all that debt is working to spur activity...
http://econimica.blogspot.com/2015/04/so-simple-even-economist-or-fed-can-get.html
Last chart in this report shows the growth in Chinese credit from $2 T in '00 to current '$28 T...and the increase in oil consumption but you can substitute copper, or steel or or or...
http://econimica.blogspot.com/2015/04/how-peaking-global-crude-oil-production.html
I think you nailed it pretty close to the 10 ring there, Ham-bone.
ZH writers were banned from wall st for fraud. They work for the tribe you idiots. You still don't understand what money is and think your gold won't be confiscated after your owners get the debt as high as they can and keep the world servicing it with a stupid fucking gold currency.
Wake the fuck up. Lobby for public banks. You should know who Tyler is by now since he has never mentioned such a thing.
Tyler's only complaint with banks or the Fed is that too much Fed printed money kept them from doing more forclosures like they did after the Great Depression. You stupid fucking morons.
http://www.youtube.com/watch?v=5soFCyjNByk
https://www.youtube.com/watch?v=FshkO8HqQ10
"Wake the fuck up. Lobby for public banks"
And you've been spreading this message for, um, 7 weeks?
Feel free how to educate me on how "public banks" are going to be the "solution" to what ails us. Actually, how about just stating what you believe the PROBLEM is? I can make any "solution" look good if I manage to convince you to swallow some shitty premise first.
I'm still thinking (as I have stated now here for nearly 5 1/2 years) that THE problem lies with our thinking that we can base our existence on perpetual growth on a finite planet.
Bingo! RE perpetual growth/finite planet
broken math is broken math - no matter how you wrap it up - capitalism, socialism, whateverism - public banks - free money blah blah...
i fear that ultimately it may be an issue of biology - reptile brains consuming resources to their limit, population grows, resources shrink, population 'shrinks' etc.
seems to be same as it ever was for our species - just on a global scale this time.
we will live in interesting times.... sadly.
.
There is plenty of demand, as a matter of fact, demand of infinite.
Chinese are no longer willing to SUPPLY goods at cheap prices.
This is a matter of SUPPLY, not demand.
Don't agree. I have money. I have needs, but I don't need what China has for sale, therefor, NO DEMAND.
Think CROWDS, not personal.
Think walmart.
There is plenty of demand for chinese stuff
For how long? Purchasing power diminishing, and the whole damned thing is looking like a wash out. People are stupid but most aren't crazy. We've seen the prices of cars almost doubling in the last ten years. Credit will only carry this so far. I think people are finally tapping out. Demand and supply in a normal economy are typically some form of balance. It's still balanced, only smaller weights on both sides of the scale.
Lack of growth doesn't mean demand has fallen to zero. It just means that it's not growing anywhere near as rapidly as most expected it to (or NEED it to, if you're a central bank in a highly indebted country).
The 7% they claim isn't good enough. The reality of near-zero growth in China is DEFINITELY not good enough.
They flat-out copied our credit growth/speculation model and guess what happened? They're ending up in the same pickle we are.
Yes. It's what comes with growth, with "interest." It's the exponential function cranking up the speed. Destination was always a certainty. To borrow from ZH's slogan, "it all ends up dropping to zero."
After all the years here I have yet to hear from anyone as to how there can be a "capitalist" (I will use only that "system" as it's the favorite of folks here) with no growth. I've gotten all sorts of half-hearted answers, but most fall to the level of "it'll just work."
I learned in manufacturing that the key is to try and kill something before it manages to escape out into the public: if you can't kill it then it's likely a keeper (queue up sales). Our global financial/economic system/model, however, was never subjected to such scrutiny. No one bothered to ask the basic question of whether the system could operate without growth. I know that many will toss out that "we don't have capitalism," that if we only had the pure/true thing then it would all just work. Again, no math provided. No one wants to discuss what happens when we cannot scale any more. Folks can scream "innovation" all they want, but "innovation" doesn't create matter, matter in concentrated forms that we've become so dependent on.
We've flat run out of "new markets" to absorb continuing growth. We over-sold to the future. There is but one path, and that's contraction. The System is NOT going to work with the long contraction period that lies ahead...
Or could it be that capitalism is not about growth? I think it's about trade with no losers, where both sides win. Maybe growth is necessary because of all of the "overhead" that has attached itself onto this trade, all of the bureaucracy, the marketers, the traders, the taxes, the infinite layers piled onto production like leaches sucking the blood from it. The system is parasitical, demanding more and more of the output of production. Humans have not been able to keep up, for they must still eat. The parasites can't kill their producers, so they have imported cheaper labor for sustenance, and invested in technology that further leverages production, paying for it with debt that they desperately are trying to induce the producers to buy after destroying any other means of wealth protection. We are building our own guillotine.
Utopia will be the new world.
The world with reduced population
The world with no unemployment
The world where those who own the means of production (automation and technology) can finally return to their position of dominance that was lost when slavery was outlawed. They can again truly own the means of production, finally replacing their human slaves with machines.
Utopia DOES NOT INCLUDE US.
I'll bet you buy a lot of what China makes.
Clothes, Hard drives, tvs, phones, car parts, etc etc
Desire is infinite. Demand is tempered by the available resources to pay for those desires.
Interesting how Goldman and the usual gang have 'come around' and see problems in our global markets and economies nearly everywhere these days. Isn't this the usual sign of 'change' or a reversal in the market that this gang usually issues weeks before they make it happen? Sort of like how intel agencies hold 'training ops' before and during 'terrorists' situations.... it's as if we are sheep being led around don't you think?
I don't operate based on what GS and others say. Anyone who does must not understand how things work I suppose.
Perpetual growth on a finite planet isn't possible. Whether GS agrees to this simple mathematical fact or not means little, if anything, to me.
Rather disappointing report from PNB. Import droped mostly due to drop in commodity prices, big win for China. PNB just jumped to weak consumption in one sentence without elaboration?
Lame.
Mr Xi is not happy at the Moscow celebrations. Perhaps reality will prevail.
I love the comments section here. Tidbits of both great insights and complete idiocy. The typical America haters mixed in with the Armageddon crowd. This crap has been going on forever. If it weren't for America we would not be having these conversations. Period. Growth comes from innovation in the pursuit of profit in a free market. Growth never comes from monetary manipulation, social policy, government spending etc.. Sure, there might be slight of hand gains like you see in the stock market in recent years, but no new real growth. The system works just fine when corruption is minimized. What we are seeing today is what has been going on for decades. The only difference is now they are fully exposed via our open and instantaneous access to up to the second data. These crooks are playing out their last hands as fast as they can. Corruption has reached critical mass and the good money has left the table. Now the race is on to see who will be the last printing press standing. We have already moved to a single worldwide currency and it resides in digital form in the ether. America is the most trusted place on the planet still, remarkably, because we are the largest free civilian armed militia on the planet. We are slow to react, but rest assured, we react. We can clean up this mess, but some people have to hang first. Allot of them.
As for the we are out of growth because of finite resources crowd, uh, grow a brain. Anybody forecast Apple Iphone sales 20 years ago? How about Google in 1985? No. Free enterprise and innovation create growth and natural resources will seek optimum utilization where there are profits to be made.....as long as regulation and tax policy do not get in the way of wealth creation. When incentive is killed by redistributive communist policies, growth does not exist. People ar rational regardless of how stupid the intellectual crowd thinks most people are. America is under assault and therefore the rest of the world is under assault. When we dont innovat and grow, nobody else does. Like it or not, its a fact. So suck on that you euro commie faggots.
All the other crap is......well.....crap.
and 0bamao is trying to get US into some super-secret "trade agreement" with the Chinese and their collapsing economy? WTF?
GREED
Apple outsourced Labour to third world where the people who actually make the products can't afford to buy the fuckers and the people who used to produce them are on foodstamps.
Apple, and just about every other western manufacturing company.
I come to ZH only to keep abreast of how many insurmountable problems the world is facing now--unprecedented corruption at every level of government, business and finance, environmental degradation, debt, imminent economic collapse (a certainty), obesity, addiction, STD pandemics, MDR pandemics, man made disease pandemics (cancer, heart disease etc), finite resource depletion, religious fanatisicm, drug cartel violence, nuclear proliferation, death by drowning in pornographic gluttony, global psychosis, imminent war, etc, etc....etc--and to laugh at everyone pointing fingers while proffering solutions.
Every time economic data is released, CNBC et al. spin it as awesome and ZH spins it as the Apocalypse.
In truth, you can't believe either.
There are lots of other developing countries where people are getting richer and will want Chinese products.
So their long term growth propects are still good espcially when you add in the 300 million chinese in western China who will want houses and tvs and phones etc.