China Posts Biggest Trade Deficit Since 1989 As Crude Imports Surge: Is China Recycling Export Dollars Solely Into Oil?

Tyler Durden's picture

In addition to all the US election year propaganda and delayed after effects of central banks injecting nearly $3 trillion in liquidity to juice up the US stock market, something far more notable yet underreported has happened in 2012: the world stopped exporting. Observe the following sequence of very recent headlines: "Japan trade deficit hits record", "Australia Records First Trade Deficit in 11 Months on 8% Plunge in Exports", "Brazil Posts First Monthly Trade Deficit in 12 Months " then of course this: "[US] Trade deficit hits 3-year record imbalance", and finally, as of late last night, we get the following stunning headline: "China Has Biggest Trade Shortfall Since 1989 on Europe Turmoil." Here we must apologize, but blaming the highest trade deficit in 23 years for a country that needs a trade surplus to exist, on the Chinese Lunar new year, which accidentally happens every year, is more than a little naive. Because as the charts below indicate, while exports did in fact tumble in a seasonal pattern as they do every February although more than expected, February imports of $146 billion not only did not drop, but posted a 19% increase compared to January, and soared 40% compared to a year prior. Why? Perhaps the second consecutive record high in monthly crude imports has something to do with it. Which in turn when considering the huge selloff of US Treasury paper by China in the last few months, indicates that the world's fastest growing economy no longer has an interest in taking its export dollars and using them to fund purchases of US paper, but is in fact converting US fiat into real, hard goods. Such as crude (for all those curious where the marginal demand is coming from that is). And most likely gold. But we will only learn about the gold hoarding well after the fact, when China is prepared to see the price of the metal soar as it did in 2009.

In the meantime, what is truly scary is that for the first time ever, virtually every major economic block in the world is importing (how that is possible in a closed loop system is a different question entirely).

There is hope of course that Europe will be a net exporter (courtesy of the drop in the EURUSD which led an export surge in the only economy in Europe that actually makes things, Germany) when Eurostat announces January numbers in a few days, although if past is prologue and the December EU27 trade balance of a whopping €1.7 billion is any indication, we probably should not get our hopes up too high.

While we wait, without further ado, here are some truly stunning charts showing the epic collapse in the Chinese economy, which while still experiencing intermittent flashes of inflation, will have no choice but to resume easing all over again, in the process sending all commodity prices higher yet again.

China total imports and exports - whoosh:

China trade balance by region - whoosh:

China trade with the US - whoosh:

China trade with the EU - whoooooooooooooooooosh:


However, definitely no whoosh here:

Here's a thought why not:

A tale of two civilizations, one in ascent and one in decline, can probably be best summarized by how they ration for the future in that most important of commodities - energy, in this case vis-a-vis the respective treatment of the strategic oil reserves of China and the US. Because while all the rage in D.C. political gab in recent weeks has been whether the US will allow a release of oil from the SPR, just to appease those Obama voters who actually have a job and have to take a car to get to it, things over at America's nemesis in civilizational conflict are diametrically opposite. As Bloomberg reports, China has "started filling its emergency petroleum reserve at Lanzhou in the nation’s northwest, according to an official at the nation’s largest crude producer." Unlike the US, where everything is now a function of market liquidity, evil speculators, and political ambitions (rest in peace supply and demand), China is completely ignoring all the day to day mundane drivel, and is doing what is right - which is to make sure it is prepared for an "eventuality" in the crude supply. Said eventuality is 100% guaranteed to happen if the Panetta-McCain is given a green light to allow the liberation of Iranian crude to finally proceed following years of foreplay.

Oh, and lets not forget this particular whoosh:


...Is it starting to make sense now?

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krmont22's picture

So who is experiencing all the trade surplus?


CompassionateFascist's picture

Canadian shale glop, with or w/o Keystone, was supposed to go to China; Panama Canal being enlarged for Gulf supertankers...late, late effort to wean Beijing away from ME oil and get the dollars back here. Now too late. IranWar will begin with China still tied to Tehran.

BigJim's picture

The 'Revised Treausry Holdings' is in millions, so it's gone from $1.2b to $1.15b? What's the big deal?

Am I missing something here? Or should the '$MM' be $b?

smiler03's picture

But Germany's budget deficit is shrinking!

German Budget Deficit Plunges to 1 Percent of GDP,1518,817363,00.html

smiler03's picture

Sorry, I confused budget deficit with trade deficit.

Onohymagin's picture

Looks to me they are spending small portion of reserves to buy oil.

Smart move, hardly a surprise.

LongBalls's picture

It's a VERY SMART MOVE. This move allows them to stagnate the US economy which puts further pressure on the Dollar. It also increases the probability of continued US deficits that motivate the banksters to smash the price of gold for their purchase. China is positioning itself nicely for the reserve currency. They have all the cards except one. Can they win the war?

Joenobody12's picture

Like any country, China does what is best for China but to think China aims at destroying the US economy or dollar is just lunatic. China does not have the time to think how to do evil to the US. The US decay on its own without outside help.   

But it sure feels good to blame others for a problem that is you are own making.

matrix2012's picture


Nobody will win any war among the nuke club... only warmonger psychopaths will ever think that they can win the war neglecting the nuke's MAD!  Nonetheless, lately they boast more often that it's possible to achieve a victory in a nuke war scenario!  

Just see what they are trying to accomplish along Russian borders, installing those anti-missile radars encircling Russia. What will Russia do then? Of course they will increase their deterrence power, deploying even more Multiple Independently-targetable Reentry Vehicle (MIRV), including in its Kaliningrad enclave. And for those host countries to such radars (Poland, Romania, Portugal, Spain, Turkey), now they are qualified as the new nuke head targets.

Same thing will happen to China, they have such capability and resources to not let such domination happens.

Eventually those warmonger psychopaths will drive the world to its brink with their falsified doctrines and beliefs!


Element's picture

I concluded some years ago that the US's blundering towards fielding an unnecessary and also totally unworkable (in an actual EMP attack) anti-ballistic missile network is going to drive Russia and China towards enlarging their strategic arsenals, again. And to regenerate higher-yield warheads, in order to deliver assured EMP kill effects, which can punch through whatever defence the US and NATO erects.  Plus another wasteful round of stealth manoeuvring MIRVs on fast-boost high-throw-weight ICBMs will be needed to deliver them.  Plus we'll going to see a new range of directed energy anti-satellite technologies fielded to eliminate existing US space-based recon, GPS, radar, and target-tracking systems.

The US is also fielding new generation passive infra-red detection and terminal tracking of missile boosters and RVs, to try and avoid the effects on tracking, or on terminal-seeker radar performance, due to EMP effects. 

i.e. they are trying to deny Russia the ability to effectively use EMP to make missile defences ineffective.  That adds another layer of imperative and alarm within Russia, to quickly create an effective system that is so electronically and thermally disruptive that it can create enough electrical, communication and background-noise, for Russian missiles to get past any US missile defense or passive sensor network. 

The Russians, being Russians, will solve this 'problem' by simply fielding a nuke of such unimaginably stupendous thermonuclear yield that it'll fry anything electrical, and create so much heat and comms interference that even the newer US missile sensors and comms technology still won't be able to operate.   But is there any supporting 'evidence' for this sort of new Russian approach? 

Unfortunately there is;

Russia works on 100-ton monster ballistic missile

19 Dec 2011

Russia works on 100-ton monster ballistic missile. In connection with the plans of the United States to develop the air defense system in Europe, in close vicinity to Russia's borders, and because of the unwillingness of the US side to provide any guarantees, the Russian Federation continues to take measures to preserve parity in the field. In particular, Russia's Strategic Missile Forces (SMF) will be renovated with the help of state-of-the-art Topol-M and Yars complexes during the upcoming ten years.


In addition, Russia will pass into service a new intercontinental missile of enormous power.  "The decision about the creation of the new silo-based missile system with a liquid-fuel heavy missile has been made. The complex will have increased possibilities in overcoming the prospective missile defense system of the United States," Sergei Karakaev, the commander of the missile troops said. The new missile, the mass of which is going to make up 100 tons, is said to replace the world-known "Voevoda" ICBM.



When I first read about this I thought it was completely nuts and was tempted to discount it. For god's sake, what possible need could the Russians have for a 100 ton ICBM?  It's seemed bonkers. But there are two possible reasons for it; (1) what if they want to field a structurally hardened multi-skin booster chassis that can withstand even a concerted ABL laser attack, while (2) still being powerful enough to fling a very large and heavy super-high yield EMP warhead towards the Atlantic basin area, that can create an EMP electron-pulse that's so insanely powerful that it just fries every mother-fucking-thing that's electronic, over most of a hemisphere, and even burns through electrical shielding and common EMP mitigation and isolation attempts.

They're Russians for crying out loud, this is what they do!

The Russians have already put ICBMs and cruise missiles into shipping containers, trucks and rail cars, and then they show videos of these deploying. Meanwhile the western media idiots are left wondering why they did that?  Do the Russians want to export hidden missiles to terrorists?  Of course not! It's because they want western powers to know there's absolutely no chance a Russian EMP or nuclear strike could be prevented, if Russia was ever forced to launch one.  i.e. they would be able to deliver warheads even if ICBMs could be shot down, and a Russian nuclear attack could come from anywhere, anytime, and no one could ever hope to stop it with a missile-shield. 

That is what they're demonstrating and the media may not have seen it for what it was, but you can bet NATO and the Pentagon understood -- it was a direct nuclear warning to back-off.

This is actually serious nuclear sabre rattling, as is every US anti-ballistic missile test, and development, or forward-deployment near to Russian borders.  We're now at a point where Russia does not trust the West at all, to not sneak in some form of armed attack on Russia.  They think an attack is likely and they clearly disbelieve the 'reset-button' diplomacy of Hillary Clinton, and now believe she's a deceiver, a liar and a global provocateur.  Not a diplomat of any sort, just a two-faced warmonger, only pretending to be interested in peace.

Plus in December China had told its military to prepare for anything, including full-scale war.  Russia essentially did the same thing, placed nuclear forces on alert, and actually dispersed mobile TELs with nuclear-tipped ballistic missiles, that were designed to be capable of sustaining an EMP barrage over eastern European radar sites.

In other words, decisions have been made, already, about the near future unfolding, and we're now along for the ride.  Things like China filling up its oil reserve and dumping USD is part of the next step.  The US is still smiling and hiding its teeth, while pretending that it isn't really happening, but the other guys are now fully alerted, and aren't fooled one bit by the Washington soft-soap routine any more.

slewie the pi-rat's picture

another +$5+/bbl and prez0 will sell them ours! 

obviously, they are gonna build some huge fuking refining capacity for asia

then, we can get ketones in our toothpaste, too!

Normalcy Bias's picture

I've always preferred Chinese LEAD-Flavored toothpaste, but it does make me somewhat moody...

Normalcy Bias's picture

...and China has millions of wifeless 'extra' men they can afford to lose in combat, motivated by promises of the 'spoils' of war.

slewie the pi-rat's picture

...wait till the market for houseboys recovers and just export them

BigJim's picture

...indicates that the world's fastest growing economy no longer has an interest in taking its export dollars and using them to fund purchases of US paper, but is in fact converting US fiat into real, hard goods.

Took them long enough.

slewie the pi-rat's picture

after decades of discussions at the highest levels, we finally gave them our permission


CrashisOptimistic's picture

You guys have just got to wake up.

IT'S ALL ABOUT OIL AND IT'S NOT ABOUT ANYTHING ELSE.  Obsession with printing and central planning and who owns how many Treasuries is just insignificant in comparison to the lifeblood of civilization.  It's not gold.  It's not money.  

It's oil.  

China's PER CAPITA consumption of oil is about 10% of the US's.  They have a very very very long way to go ramping up their burn rate to achieve American levels of lifestyle, and make no mistake here, they are entitled to it and they WILL do it and it won't happen from a bigger pie -- it will happen by slicing some from America's present slice.  

There Is Not Going To Be Enough.  There Is Not Enough Now.

Billions are going to die in a manner sudden and ugly.  The contest is to see to it that it's them and not us.

matrix2012's picture


There's one point here that needs further thorough thinking:


"to go ramping up their burn rate to achieve American levels of lifestyle"


I don't think ANY other country or civilization needs to go to the same path as the American in burning the oil at such extravaganza rate in order to achieve a 'GOOD LIFE (style)'! In fact, NO other country should follow the same dead path... our Earth simply doesn't have such stockpile of oil to support such lavish, unjustified consumption. It's a pure decadence.


CrashisOptimistic's picture

So go ahead and explain that to Chinese peasants.  

"You don't need to experience extravaganza.  You can if you want, but you don't need to.  You can have the GOOD LIFE as a peasant on a farm here and you don't need to have a pickup truck that gets 15 miles/gallon to haul stuff around your farm.  And you certainly don't need a John Deere tractor to help with your plowing.  Be content with oxen."

And explain this to the non farm rural folks buying apartments in the suburbs.

"You don't need to experience extravaganza.  You can if you want, but you don't need to.  You can have a GOOD LIFE without a car to take you to work.  You don't need a car that has never existed here before consuming oil just so you can choose from places of work outside a 1 mile walking radius.  Be content walking."

They are planning to buy over 20 million cars this year.  You should go stop them by persuading them not to.


matrix2012's picture


i don't close my eyes that among the consumption, some are quite legitimate and inevitable; however, some others may not be quite necessary either (i call it 'extravaganza'). Among all the nations in the world, sorry to say, in general sense American people are known as notorius for their EXCESSIVE consumption in all aspects, most of them may not really understand the meaning of THRIFT!

Any country with big population should rely on public transportation to move around its people, and railway is the #1 mass transport, complemented by bus and other smaller vehicles as the feeders. Relying on personal car to move around the people is a luxury and a waste in many occasions (imagine drving around a big SUV carrying 1-2 persons with a low mileage gas ratio).

For some in society who aspire to own cars, state/govt must encourage them to go with compact city car with more efficient fuel consumption i/o the monster SUV etc through various means.

And people must learn and adapt to be contented with 1 or 2 mile walking radius. Such walking excercise is also very good for health, among others it does prevent obesity! Hint, it's hard to see fat guys or ladies in Spore/HK/China/Japan/Korea...they just walk a lot. Or like current uptrend, go on bike.

And DEFINITELY govt/state must RESTRICT the number of car ownerships (Spore has set good example with the COE - car's ownership entitlement). If oil is not the problem, then road traffic will be the obvious horror with the mass flood of cars moving around! State/govt can't and shouldn't prop the self-interests of automotive industry on the costs of the whole society!!

Possibly in reality farmers must combine the tractor with oxen as necessary :) work more dilligently and intelligently to avoid the chemical fertilizers from Monsanto, Dow Chemicals and the gang for quick and instant yields but harmful to the land eventually, use more organic fertilizers to preserve the quality of land and better harvest at lower cost in the long run.


Marco's picture

They don't have to follow it to the letter, but no matter to which extent the creditor nations increase their standards of living ... they have enough population that every little bit of it will have a large impact on the standards of living in the debtor nations.

That said, China's diet is being taken over by billionaires who don't want to let China's wages rise ... of course they don't want to continue funding American consumption either ... and they probably close their eyes to the fact that the only alternative is a global depression.

surf0766's picture

Is there an official SPR for China?


Yeah, let's see, export all of your natural resources overseas in exchange for worthless fiat or just keep the resources for yourselves.  Hmm, seems like a no brainer. 

q99x2's picture

The US will be self sufficient as soon as it throws the politicians and elite into FEMA camps and then closes its borders and redistributes wealth. The reason we are not self sufficient is as Merkel says, "the centers of power have changed." Time for the ones that changed the center of power to be sent to prison.

In other words US resources will be used by US citizens sometime after the revolution or never. Inflation is at least 8% for basic necessities. Within 2 years the current revolution will be forced to spark to the general population. 

sun tzu's picture

You had me until redistribute. How did that work out in the USSR or Zimbabwe? Give a fucking crackhead $1 million and he'll be broke or dead by next year.

MayIMommaDogFace2theBananaPatch's picture

...dead-by-dawn is more like it.

Kobe Beef's picture

And then you can scavenge the corpse! Mmm..dead crackhead, it's what's for dinner. Welcome to Ameribabwe!

surf0766's picture

You give us your wealth first. We will return the favor.. I promise.

sun tzu's picture

Except most OPEC nations produce nothing else but oil. So they can sell the oil to buy food, cars, technology etc or sit on the oil and starve.

ConfederateH's picture

OPEC, who are obligated by membership in PAX Americana to accept dollars for barrels of oil.  It is like the gold window before Nixon took the US off of the gold standard, the rest of the world is cashing in dollars for under priced (in dollars) oil.  OPEC will be forced to leave the $IMFS soon when all those derivatives and CDS's turn to ashes.

BigJim's picture

  It is like the gold window before Nixon took the US off of the gold standard, the rest of the world is cashing in dollars for under priced (in dollars) oil. 

Nice simile.

Sudden Debt's picture

I admit.... I did buy a new blender last month.... So that does account for about 50$...

Stuck on Zero's picture

Made in China no doubt.  unlikely to last more than a few months.

Silver Bug's picture

China isn't stupid. They have a long term plan. They are getting rid of their fiat and acquiring wealth in the ground.

johngaltfla's picture

krmont, that would be the banksters.

oogs66's picture

Who has the surpluses?

ZFiNX's picture

Canada has a nice chunk for itself.

Mr Lennon Hendrix's picture

Tar sands are worthless so please do not include them in your math.

Printfaster's picture

Canadians call them "oilsands".

Only worthless, craven, campaign donation driven American politicians call them "tarsands".

Mr Lennon Hendrix's picture

Let me be more specific then:  after the oilsands are heated with Natural Gas, the EROEI is worthless.

oddjob's picture

The energy expended by goverments to source,secure and transport cheap foreign crude dwarfs the energy used in the Oil Sands reclamation. Its not even close.