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China Economy: China Trade Boom - Fact or Fiction?

China’s “Loony” Trade Boom

 China’s “Loony” Trade Boom

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The trade numbers coming out of China today are almost beyond belief. In fact some news sources warn against believing them at all.

Here’s a quick look at what all the fuss is about. As the developed world staggers out of recession, China reports that its exports climbed a robust 21 percent in January from a year earlier. Even more stunning, imports surged 85.5 percent from January of 2009.

But the Wall Street Journal threw some cold water on the excitement, reporting that “year-on-year comparisons are almost meaningless” The reason? China’s Lunar New Year holiday, which shuts down just about every business activity in China, fell on January 26th last year. This year it falls in February.

In other words, critics are making the point that January of last year had four fewer business days so it cannot be compared to January of this year. Fair enough. The comparison may be distorted but ignoring these results entirely would be throwing the baby out with the bathwater.

An 85.5% surge in imports is a breathtakingly large increase – much too large to have been generated by a difference of four business days.

A survey of other available evidence suggests that the Chinese surge is very real. Keep in mind, this is the third straight month of strong increases in Chinese trade figures, suggesting that a pattern of stable growth is definitely emerging.

It is also impossible to overlook the confirmation of a watershed event we have been discussing for some time now. China has now officially surpassed Germany as the world’s largest exporter. Last month, Chinese customs officials reported that total the nation’s 2009 exports were more than $1.2 trillion. That is well ahead of the $1.1 trillion in exports that Germany confirmed this week.

Anecdotal evidence also buttresses the trend. The New York Times reports some factory executives in the Pearl River delta region near Hong Kong have begun complaining of shortages of empty steel shipping containers. Container shipping companies have begun to raise freight rates.

China's iron ore imports remain strong and current market prices suggest that demand for future shipments is still high. Auto sales in China continue to accelerate, up by 143 percent from a year ago.

Shanghai Daily confirms that China’s strength in exports was broadly based, and was driven by value-added goods like high-tech products, which account for $30.8 billion in exports and electromechanical products which make up $62.5 billion.

There’s also evidence that China’s appetite for imports is boosting other regional economies including South Korea, Taiwan and Japan. In one example, Japanese machinery exports surged 20.1 percent in December, well up from record low a month ago.

It is true; the timing of the Lunar New Year may have inflated China’s trade results by several percentage points. But the evidence shows that China’s trade picture is in a steady and strong upswing from the depths of the global recession last year.

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Committed To Your Profits In China,

Jim Trippon
Editor
China Stock Digest
 

http://www.chinastockdigest.com



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