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The World's Exposure To China In 6 Easy Charts
In “Global Trade To Remain Subdued Until At Least 2020,” we highlighted the following excerpt from a Goldman piece on depressed dry bulk shipping rates:
The transition from investment to consumption in the Chinese economy, together with a shift towards cleaner energy sources, has caused a sharp deceleration in dry bulk trade. After expanding at an average annual rate of 7% over the period 2005-14, seaborne demand in iron ore, thermal and metallurgical coal is set to increase by only 2% in 2015 to 2.5 billion tonnes as these trends persist. In the steel sector, domestic consumption growth ground to a halt in 2014 and the prospect of peak iron ore demand is nigh. In the power sector, demand for coal-fired generation is suffering from a combination of weaker economic growth, rising energy efficiency and a diversification in the fuel mix towards renewable energy, natural gas and nuclear. There are no other markets large and/or dynamic enough to offset a slowdown in China in the foreseeable future, and we forecast trade volumes to stabilize in the period to 2018.
This speaks to the fact that Chinese demand is effectively the engine that drives global growth and, as we’ve said on too many occasions to count, the country’s difficult transition from an investment-led economy to a model driven by consumption and services, combined with a war on pollution and an impossible attempt to curtail shadow banking while preserving robust credit creation, will ultimately conspire to make China unreliable as the centerpiece of the global recovery thesis. UBS has more on the above:
In the decade to 2014, China quadrupled the number of countries to which it was the biggest export market, as the US almost halved the number of countries for which it held the same title. Over the same period, all countries under our coverage saw China's share of their exports hold broadly steady or rise up to four-fold. The jump in their direct "true" reliance on China (excluding reprocessing trade) was even more dramatic, with South Africa's and Switzerland's up by more than 8 times, and Australia's by almost 5 times.
Two factors have made global exporters more directly reliant on Chinese domestic demand and thus more vulnerable to the ongoing property-led downturn in recent years: 1) rapid growth of China’s domestic market; and 2) processing trade's declining share of Chinese trade due to China's expanding productive capacity.
In this year’s version of our annual China export exposure chart book (available upon request), we show how China's slowing economy is affecting commodity, reprocessing, and developed country exporters alike.
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UBS concludes: "However, with China's property construction deceleration set to deepen this year in a multi-year slowdown, we may see a longer-term decline in China's appetite for foreign industrial imports."
In other words, when China lands hard, so do the rest of us.
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What this data masks is how China is turning its ship around and is consuming more at a time when it is also producing more.
This is massive trend change globally where every nation is importing less because 1) they need to create more jobs for economic and social stability, 2) to enhance tax revenues and 3) to insulate from the downfall of another nation such as Greece or Ukraine or Syria etc or imploding Western banking systems or to ensure stable supplies of commodities or food when it is needed most by every nation including China, with currency wars playing out nonetheless. Large exporting nations like India, Brazil, Russia or across Asia like Thailand etc are also seeing declines in exports due to above reasons.
I believe the bigger the nation the more the demand for food and commodities of a nation especiallly China when it is growing at such a speed of USD 600 to USD 700 billion per annum of GDP.
Globalization and trade pacts have fallen on their face as attested by the previous post of crony capitalism.
Did anyone hear of the blockage of the Calais chunnel and stoppage and small looting (by hungry poor people) of trucks and trains between England and France yesterday? Such events in 'developed' nations are causing China and every other nation to rethink their strategy in terms of imports (and insulate themselves by either controlling the entire trade route or produce more internally) which is basic commonsense. calais channel blocked
This is the same analogy many ZHers use stating that we must produce our own food for self consumption, own a small piece of land, with guns in hand and gold under the bed ...or in a boat ;). This is exactly what China is also doing but their scale is gigantic.
The China I live in seems to be quite different from the China you continuously describe. However, I hope and wish you would be correct but reality is different.
How so?
I'm in Qingdao, and I see a lot of contented people going about their lives. Everybody is working, everybody is better off than 2 or 10 years ago. Construction is booming and people are upgrading their homes. Manufacturers and exporters will tell you that things have dropped a bit, but it is still good. Nobody says anything about the stock market dropping 16%. Everybody knows it is overvalued, and a fallback is expected.
Life is good here. I had to return to CT for a few weeks last month. Americans seem to be in a dark mood.
I'm in a city a little east of Xi'an here, known for doing 60% of the aluminium processing for northern China.
Closed shopping centres, difficult employment scenario, construction cranes that idle, and I know a mining engineer who hasn't been paid at all for the past six months after having his pay cut in half from 8000 to 4000 RMB last year.
It really hurt my feelings when Pringles was replaced with some knock-off brand of crisps in all the local shops, because price is not a big deal to me personally, and the quality simply isn't there in the knock-offs and the packaging bloat to get to the contents is absurd; but people around here, formerly affluent and keen to show it, simply no longer splurge on western brands.
It's like KFC and Dicos. The local KFC is empty now at lunch, and the Dicos knock-off is still half-full. But you get chicken nuggets from Dicos and the sauce packets are hard to open without spilling the contents all over your hands because the factory didn't care about ease-of-use, just keeping appearances similar. Many little details at Dicos scream cut corners. I'm basically the sole flotation device that the local KFC has until times improve.
pacrim888, fair enough. You have a right to your opinion but without any facts over the last 10 or 20 years of China vis-a-vis other Top 10 major nations of the world, how do we believe what you say is true?
ALL western banks and Japanese banks have tumbled in the last 20 years while Chinese have grown. Many western banks have disappeared completely. You call this 'better'?
There have been no black swan events in China while there have been 3 being 9/11, Tech crisis and subprime crisis in the 'developed' West leading to millions of job losses and billions of debt resulting in unseen misery for millions for no fault of theirs but mostly because of their Govts and banksters.
China still operates its banking model in a socialistic way on a state owned basis paying civil servant salaries which is the way banking must be.
GDP of China has grown 5 times in less than 20 years and the best of countries have stagnated/declined except for Russia and to some extent India and Brazil over the last 20 years.
Poverty, crime, protests, hunger have declined in China while have risen almost every where including US and EU in the past 20 years.
So, how does anyone believe that Rest of the world is doing better than China? It is a question of comparison of current situation and improvement over the past, is it not?
Are the ports, banks, steel mills, roads, infra, salaries, currency, GDP, stocks, sales of every possible item, total number of tourists inside as well as outside China, major successful companies being created by Chinese from consumer goods to space and planes and military to real estate and IT (outside of Silicon Valley, no less) etc better in China today than it was 20 years ago while they have also been able to contain the population explosion? And this is at a time, when current situation in every single country, has deteriorated over the last 10-20 years?
Can you elaborate on what reality are you suggesting is worse than the one I describe for the vast majority general public in China?
If you dont like living in the area of China you currently live in, I suggest you change your location and your situation and take charge rather than believe that nothing can or will change.
Change your career, change your city or do something so that you too can benefit from the rise of China.
It is indeed very tough to change epecially with rising costs of living worldwide and inability to reduce our expenses in times where income will become very difficult to earn when we have so many people everywhere and low incomes is the new normal.
This is what is causing demand destruction and closure of companies and major job cuts globally because people simply cannot afford things. It is a time to conserve and spend less else most of us will perish under the crumbling mountains of debt just like Greece...
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Good morning Ladies of Zerohead, besame mucho!
If you are not careful you might get hit in the rear end.
I don't see that a nation that is able to produce goods and sell them at home is at a major disadvantage. Imports are great for raw resources, but selling the resulting goods at home enriches the local economy.
We seem to make too much of a big deal of China's decreasing exports to US and Europe when their local demand shows a healthy increase.
It's not like this happened overnight or behind our backs. The Fed's have been watching this happen while QEing for the benefit of Goldmean Suckers and the rest of these low life. The question is: what is the agenda and who is setting it? The USA has a way of preying on its own and that ideplogy is coming home to roost. There was a time when the USA lead the pack, now its in there with Greece just waiting for the ball to drop.
"In other words, when China lands hard, so do the rest of us"
When dammit, when ???
It's a good thing you don't trade Tyler, you would have lost your shirt a million times...
Since when does the stock market have anything to do with economic reality (except in the worthless economic theory)? Trading is one thing, so is economics or baking cookies for that matter.
greatest joke my dad taught me..."how long is a china man"
he laughed his ass off, i didnt get it....duh...
Hu was the president of China between 2003 and 2013. lol
Exports? It's more about China's enourmous stash of US Treasury notes, and what it will eventually do with them...
China is using them to buy gold, copper, silver, berllium and a lot of other non-perishable commodities. The has two purposes. One is to divest from US paper, and the other is a 100% guaranteed play on commodities. They are cheap now. When inflation returns, they will be sitting on a jackpot.
The reason why commodiy prices bubbled up so high in the first place was $20 trillion of Chinese debt going into fixed asser investment.
So the geniuses of China are buying commodities now "at their lows" and getting a great bargain, when they themselves were responsible for the massive bid up?
Copper prices are now what they were before China's spending spree, so the chinese are buying now to get a good deal during the period that chinese are no longer buying? Heh.
yea and their debt isnt a scaremongering issue as you love to compare meanwhile for usa it is . having debt isnt a problem unless you have something substantial to back it which China posses , not same with usa .
Bingo. What will they do with their trillions of U$$D... (other than buy aurum fisicalum) ???
They will take the smallest hit from the Great Reset. Everybody else will take their place behind. Sounds like a plan.
In general, wages MUCH lower than other developed countries, basic but not advanced health care subsidized out the wazooo, and 2 decades of massive infrastructure enhancement. Going a little further in the thought process--housing as expensive as many places in the US and the number of mid to high priced cars on the road is unbelievable. And lastly in the thought process-- China's outflow of money internationally (buying homes, companies, natural resources) has been also unbelievable and while all this is happening, the Chinese government creates one of the most well equiped militaries in the world. In my mind. the world has been fooled beyond belief. I think while everyone was admiring the growth in China, they have been printing their asses off and maybe even were the first ones to do it ? The only problem is western nations have accounting and reporting while in China, things can be hidden easily. I think they have printed their asses off knowing the developed countries dont want to devalue the yuan and further cut any chances of keeping jobs in their own countries---so, they just keep printing and buying and keeping us between a rock and a hard place.
Why would they be printing?