Douglas Roberts Dimick

China: These Trade Numbers Are Awful

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Deutsche Bank - Equity Research HK/China Daily Update - 12 ...
By Garfield(Garfield)
Deutsche Bank - Equity Research Today's Highlights: We downgrade earnings forecasts of China banking sector due to more our bearish macroeconomic forecasts (CMB downgraded to Hold, TPs cut for all other banks). ...


Have you seen any discussion as to why all this commenced a month after the Beijing Olympics?

I was tracking capital and HR flow-reversals away from China since June. Redirection favored certain Eastern European countries and India.

I am "positioning" (via my book, Foreign Capital Investment Banking for China, due out in late January by Wuhan University Press in Beijing) that central government planners might consider immediate, significant policy revisions to realign WTO obligations with current policies and practices...

Rule of law is a mantra that could advance if not save China's cause to preclude erosion what it has gained these past years since being awarded the games...

What is the utility of this banter about China being so important for the world economy with its $2t foreign capital reserves?

Some $1.5t of currency trades everyday on the Forex. The US Dollar is the underlying currency on one of the two sides of all those trades some 84% of the time.

Consistent refusals (not failures) to "meaningfully" open media, banking, and finance sectors of China have not gone unnoticed -- among toxic toys, espionage, IPR (not DVDs) theft, etc…

There appears to be a disconnection. Inbound-outbound comprehension among central as well as provincial leaders is myopic, shaded by guanxi commitments focused only on domestic concerns. Fair enough, the same holds true within US and EU configurations.

The difference is that a rule of law via code moderates those protectionist reverberations over there. Over here, even the cash-bloated UAE is complaining that trade with China is one-way to an unacceptable point – we might note their bankers (not Chinese).

Is a shift now emerging? Can you confirm?

I call it the "otherway" response by US and EU concentrics. Tiring of China’s lack of accommodation to open key markets, centrist concerns (non-emotive, balance sheet types) are nominating Mexico and much of Latin America, which in recent months started gaining promotional focus among manufacturing associations. EU brethren are doing the same with former communist block countries – hence Russia attempting to draw a line with its timid, all but impotent military incursion during the games (also worth of note regarding timing).

If the party centrists here do not act quickly (12 months, tops) to make good on prior trade (a la WTO) commitments as well as send some of that foreign cap to develop offshore guanxi, then they stand to face one thing worse than a bunch of empty housing and commercial development complexes…empty buildings surrounded by filled streets of angered citizenry.

Shortly after arriving in March 2006, I came to the conclusion that the government here was either setting itself up with or being set up by US-EU related nation building interests. In the year of the Rat, it is now clear that the Chinese guanxi-go-go-boys (and girls) took the cheese.

The bill came due post 30 day grace period upon the closing ceremony.

Funny thing… given all the self-imploded rhetoric trickling out (and down) from government and party appendages, it appears that no one really understands what is going on. This possibility became apparent on the day that China’s (non- stimulating) stimulus package was announced, which appears not much more than the Chinese version of a bailout plan for its SOE’s.

There then comes the rub… making your comments so true about China confronting a far more painful reality than its US-EU counterparts...

Compounding the problem here, unlike in the US, the party-government matrix already owns or controls China’s hubs of finance and industry. Therefore, in effect, it is only bailing out itself, a bankrupt system, which is what it was recognized to be upon Openness and Reform was so declared.

My two years of research here detail a shell game built upon a ponzi scheme. Again, fair enough, Wall Street does it par excel lance…

However, EU and US shoulders bear hundreds of years of experience with cyclical economic gyrations. China? 20 at best – not any 5,000 years.

I had an epiphany yesterday en route to a guanxi-fueled hot springs visit with a former student’s family – father is a securities firm branch manager. Most of the guys driving (or being driven around in) those black Audis were peddling bikes just 10-15 years ago.

Where does that leave us?

Well, trade numbers are the least of the problem…

dr