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Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Europeans' Appetite for Imports Benefits China at the Expense of the U.S.

  • Summary: Europe's spending revival looks helpful to the global economy but may not mean much to a slowing U.S. economy since many of the imports being bought are coming from China. The OECD forecasts a near doubling of economic growth in the euro zone at 2.7% this year. Imports over the first-half of the year are up 18.3% with more than 75% of the increase coming from demand for goods. Still, economic growth in the zone is expected to slow from next year to 2.1%, which is still higher than last year's 1.4%. China's exports to the zone surpassed those of the U.S. for the first time in July 2005. Five-months into 2006 China's exports were $1 billion ahead of the U.S. $68 billion of exports to the zone, for 26% y-o-y growth. Chinese manufacturers are clearly moving up the value chain putting increased pressure on both European and U.S. manufacturers. For instance, China's machinery exports to Europe are its most valuable, worth nearly half of all its exports to the region. Additionally, China is now the world's fourth largest manufacturer of machinery. Some European businesses are concerned about China's growing trade surplus with Europe, which is being attributed to currency market intervention and domestic subsidies to exporters.
  • Comment on related stocks/ETFs: Motorola (MOT) is mentioned as an example of where a U.S.-based company benefits from increased Chinese exports to Europe. For a list of publicly traded U.S. companies in China see the STOCKS IN THIS SECTOR section on the right-hand side of China on Seeking Alpha. Perhaps higher spending in Europe can help China sustain its own economic growth, especially as the U.S. economy cools. Regardless, it's worth considering the argument that China is living through one of the greatest historical bubbles. There are some positive developments taking place within China however, as it continues to open up its economy in-line with its WTO accession. China's retail sector and banking industry have been in the news recently.
Source: China's Surging Exports to Europe