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Chinese exports unexpectedly plunge, inflation eases

  • Chinese exports dropped 18.1% on year in February vs growth of 10.6% in January and consensus of +6.8%.
  • However, the trend may have been distorted by the Lunar New Year holiday and fake invoicing that boosted the data a year earlier, while the severe winter weather in the U.S. may also have had an effect.
  • Imports +10.1% vs +10% and +8%.
  • China swung to a trade deficit of $22.98B last month from a surplus of $31.86B in January and vs forecasts of $14.50B.
  • "We will probably have to wait for next month's data to get a true picture of the export situation, but we shouldn't worry too much," says UBS economist Wang Tao.
  • As expected, inflation eased to a 13-month low of 2% on year in February from 2.5% in January. The figure is below the government's 2014 target of 3.5%.
  • On month, CPI +0.5% vs +1% previously and consensus of +0.8%.
  • PPI declined for the 24th consecutive month, sinking 2% vs -1.6% and -1.9%. "The risk of deflation is rising in the near term," say ANZ economists Liu Li-Gang and Zhou Hao.
  • The factors that could be dragging on producer prices include weak consumer demand and the excess capacity of some raw material-industries such cement as glass and steel.
  • ETFs: FXI, PGJ, GXC, FXP, YINN, CYB, HAO, KWEB, CNY, ASHR, CHIQ, DSUM, TAO, CHIX, YANG, CQQQ, MCHI, PEK, QQQC, XPP, YAO, CHXX, FXCH, CHII, CHXF, YXI, ECNS, CHIM, CHIE, KFYP, FCA, TCHI, CHLC, CHNA, KBA
Comments (21)
  • june1234
    , contributor
    Comments (2488) | Send Message
     
    EEM is struggling big time to break that $40 mark , getting rejected each time
    9 Mar, 01:59 AM Reply Like
  • Mike Holt
    , contributor
    Comments (1464) | Send Message
     
    China's economic data is distorted so often, both in terms of the data provided for reporting and the manner in which that data is then reported, that its difficult to derive any meaningful information from this report. This may have been less of a concern when it had implications only for China, but now that China's economy and exports have grown so large that it has a significant impact on the entire global economy, it's a very sad state of affairs when we must all be left guessing as to the truth. "Don't worry" does not quite represent the information needed by business people, policy makers, investors, etc.
    9 Mar, 07:11 AM Reply Like
  • Mike Holt
    , contributor
    Comments (1464) | Send Message
     
    Correction, the true health of the global economy as measured by the world's largest trading partner has been reported to be "Don't worry too much" which is quite different from "Don't worry."

     

    To help put this into perspective, perhaps we need a worry index that would allow us to quantify the data more accurately:

     

    Worry a lot = exports from both China and Japan have actually dropped significantly despite efforts by the PBOC to weaken the Fx value of the RMB in order to both curtail hot money inflows and to offset recent declines in the Fx value of the Japanese Yen.

     

    Worry at the exact right level = the lower Fx value of the Japanese Yen has resulted in Japanese exports taking market share away from Chinese exports but China will still be able to rely on other sources of funds to service its rapidly growing debt now equal to over 200% of its GDP

     

    Don't worry too little = Exports in the prior month may have been overstated to conceal hot money inflows seeking to take advantage of 20% interest rates on high yield money market accounts available through shadow banking channels used to fund Fixed Asset Investment spending equal to 50% of China's GDP and targeted to grow at only 17.5% in 2014 [down a whopping 2% from a little over 19% growth in 2013]. But, by allowing the renminbi to weaken, this will put an end to these hot money inflows and choke off this source of financing that has allowed Fixed Asset Spending to spiral out of control.

     

    Don't worry = accurate data is actually available and it shows that China's exports remain strong, its domestic consumer spending is increasing at a rate higher than the 17.5% targeted increase in Fixed Asset Investment spending, and foreign investors without Guanxi will now feel completely comfortable directing their capital into the fully transparent Chinese corporations that are now outside the influence of the CCP and subject to stringent audits that allow them to trade on both local and international stock exchanges. These capital inflows will allow China to sustain its rapid economic growth without having to rely on the high interest rate shadow bank financing that has been increasingly relied upon over the past few years in order for local government officials to satisfy the somewhat arbitrary GDP growth targets mandated by the central government.
    9 Mar, 08:21 AM Reply Like
  • Black Gold
    , contributor
    Comments (527) | Send Message
     
    I think the old saying that no one hides good news applies here...
    9 Mar, 05:58 PM Reply Like
  • James Bjorkman
    , contributor
    Comments (510) | Send Message
     
    Is this the modern state of affairs? Whenever any country, US, China or whatever, reports weak data, the answer always is "don't worry, be happy"?

     

    I mean, is that it? That's what it has come to?
    9 Mar, 08:29 AM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    I WONDER WHERE THIS AUTHOR HAS BEEN, there have been almost annual environmental catastrophes, tens of thousand protest/riots, corruption in govt, commerce, is standard play and the uncertainties of statistics constantly threaten the economic growth.
    "There is no shortage of problems facing China these days: a terrorist attack that recently left 29 people killed and 143 injured; corruption in government; a worrisome slowdown in economic growth." Gu Jinglu, William Wan,
    The Washington Post
    POSTED FRIDAY MAR. 07, 2014 06:12PM EST |UPDATED 1 DAY AGO
    BEIJING
    http://bit.ly/1nwfLcK
    9 Mar, 11:01 AM Reply Like
  • Hendershott
    , contributor
    Comments (1493) | Send Message
     
    Corruption destroys an economy eventually. It distorts the flow of capital to the point that sustainable economics no longer function.
    9 Mar, 11:21 AM Reply Like
  • diadochi
    , contributor
    Comments (197) | Send Message
     
    What did you think the Communist Revolution in China was all about anyway? The Nationalists were so corrupt that during WWII, the Japanese sometimes didn't have to fight Nationalist generals to win a battle; they just paid them off, to the immense sorrow and shame of the rank and file that had to pay the price for this. (General Joe Stillwell) No wonder they had a revolution, as only the Communist armies could effectively battle the Japanese. In addition, China had been supine for one hundred years, due to crippling levels of corruption prior to the Japanese war. The Communist revolution was a big "Enough!" to all that.

     

    But now corruption is back, big, and all the way to the top. Unless they can slay this dragon, China will grow more and more dysfunctional. The Communist party should well remember that it was their organization that came to power on the back of popular disgust with the "100 years of humilation" caused by corruption.
    9 Mar, 02:28 PM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    Corruption reemerged with Capitalism in 1978, as long as I've been here 1995, it was prevalent.
    9 Mar, 02:34 PM Reply Like
  • aeroguy48
    , contributor
    Comments (607) | Send Message
     
    Whoduhthunk that the Chinese would resort to fake invoices? Stealing intellectual property is also rampant in China.
    9 Mar, 01:57 PM Reply Like
  • bilele
    , contributor
    Comments (2) | Send Message
     
    do you expect the stocks to open lower on monday due to this news?
    9 Mar, 02:53 PM Reply Like
  • GaltMachine
    , contributor
    Comments (1135) | Send Message
     
    Holy crap that's a $50 billion dollar swing!

     

    "China swung to a trade deficit of $22.98B last month from a surplus of $31.86B in January and vs forecasts of $14.50B."
    9 Mar, 03:10 PM Reply Like
  • Abe Mishima
    , contributor
    Comments (74) | Send Message
     
    Welcome to the Debtor's Club, China. Hope you stay.

     

    Spend down your surplus until it grows into a permanent deficit. But what are they spending their surplus on? Is it hard commodities, like iron, gold, oil, platinum or agriculture (soybean, wheat, pork)?
    9 Mar, 09:03 PM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    Ignorance is golden.

     

    Cn surplus is in Forex, investments would not directly help the domestic economy.
    10 Mar, 01:54 AM Reply Like
  • june1234
    , contributor
    Comments (2488) | Send Message
     
    build more empty cities
    10 Mar, 02:54 AM Reply Like
  • Sam Liu
    , contributor
    Comments (3864) | Send Message
     
    great place to ride a bike with vast empty streets!

     

    And less pollution.
    10 Mar, 09:24 AM Reply Like
  • KJP712
    , contributor
    Comments (438) | Send Message
     
    Looks like everyone took a couple sick days off after vacation ended...
    9 Mar, 09:58 PM Reply Like
  • LeahyInvestor
    , contributor
    Comments (97) | Send Message
     
    Maybe the cold effected trade...
    10 Mar, 01:24 AM Reply Like
  • divinecomedy
    , contributor
    Comments (466) | Send Message
     
    Really? This is an old game and we've all seen it before. Isn't this the time when the Treasury would come up with their currency manipulator list, so of course they have to "manage" export numbers. Every year this happens and people are still harping about the "drop". Maybe it's all true, but what's more interesting is that copper just opened 5% limit down in Shanghai. Now that's more interesting.
    10 Mar, 01:27 AM Reply Like
  • june1234
    , contributor
    Comments (2488) | Send Message
     
    Copper is important. Needs to stay above $3 unless you want to see some problems in Chinese(and global) financial markets
    10 Mar, 07:44 AM Reply Like
  • Mike Holt
    , contributor
    Comments (1464) | Send Message
     
    The Japanese Yen has just been significantly devalued but I haven't heard any curency manipulator complaints being raised against them lately. Is that because they won the currency war by implementing the same QE program that we did? I am sure it was frustrating for the Fed to go to such great lengths to reduce the Fx value of the dollar only to come up empty handed.
    10 Mar, 07:51 AM Reply Like
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