China Set To Announce Record Trade DEFICIT In March

[llanlad2]

Perhaps this finally explains where all the excess liquidity has gone: with China now not exporting to the US consumer, it has instead refocused on its own "middle" class.

This is wrong. China is still massively reliant on the US consumer. I bet they still ran a massive surplus with the US. What it means to me (but I could be wrong) is
a.their import costs have gone up which means at some point the cost of exports will have to rise. ie inflation.
b. The US and the rest of the world has stopped buying as much stuff from China so China has it all stockpiled in warehouses.

[Camtender]

China Set To Announce Record Trade DEFICIT In March

http://www.zerohedge.com/article/stu...-deficit-march

By Tyler Durden
Created 03/22/2010 - 10:43
Say goodbye to China's "export economy" paradigm. In a stunning development for trade hawks, and pretty much anyone who follows the biggest liquidity bubble in history, China Daily has announced China is about to announce a record trade deficit (yes, not surplus, deficit) for March. This makes the whole CNY undervaluation debate pretty much moot, as even China now moves into the ranks of net importers. From China's official daily newspaper [1]: "The country will probably see a "record trade deficit" in March thanks to surging imports" and "will "fight back" if Washington labels China a currency manipulator." Perhaps this finally explains where all the excess liquidity has gone: with China now not exporting to the US consumer, it has instead refocused on its own "middle" class. This means that Chinese administrators are much more focused on maintaining a stable economy, and will be much more concerned about economic overheating, which goes in line with the recent indications of material liquidity tightening out of Beijing. Market News [2] reports that the actual deficit will come in at $8 billion for March, the first deficit since April 2004, when the gap was $2.26 billion. Maybe Albert Edwards will just have the last laugh with his iconoclastic prediction of a CNY devaluation [3].

More from the article:

After China's exports rebounded in December, US legislators and economists have been demanding the Barack Obama administration label China a currency manipulator in a US Treasury report due out in mid-April, which will make it possible for Washington to slap duties on Chinese imports.

"China's trade surplus with the US has been turned into a key excuse by American economists to pressurize the Chinese government to revalue the yuan," but, ironically, the calls have been growing stronger even as the "surplus keeps falling", Chen said.

The ministry also said on Friday that Washington's method of evaluating trade figures magnifies the deficit with China.


In the three decades up to the 2008 global financial crisis, China's exports registered annual growth of 20 percent but the surplus with the US contributed a big chunk to China's total. Last year, China had a surplus of $143.38 billion with the US, accounting for a hefty 73 percent of the total.

"The impact of currency revaluation on trade is limited," said Chen.

From July 2005 to July 2008, the yuan gained a cumulative 21 percent against the dollar, but China's trade surplus with the US kept rising. When the yuan was steady against the dollar from 2009, the trade surplus dropped 34 percent.

"The deficit has been vastly overestimated based on American statistics," and according to the latest report prepared by both sides, the US deficit for 2006 is "26 percent higher than it should have been," Chen said.

The scariest implication: China is quickly running out of dollars which it can then recycle into US Treasuries. This is surely the biggest nightmare scenario for Tim Geithner. While this explains the decline in indirect bidding, it also may go to refute the whole premise of China being behind the direct UK-based bidders is flawed. And if so, is it merely just the Federal Reserve doing all the buying in a covert fashion (via BlackRock or othewise) as some of the more conspiratorially-minded market followers have speculated?
Here is the most recent prophetic insight from Edwards, as of March 2, pertaining to this critical shift:

Clearly to the extent that the rise in China?'s official reserves depended on the size of its trade deficit, there will be reduced purchases of US Treasuries. But China has, in part, merely been swapping official dollar purchases of US Treasuries with surging imports of dollar-denominated commodities on the trade account (see chart below).

[4]

[llanlad2]

Re: China Set To Announce Record Trade DEFICIT In March

Trade balance stats.

According to these stats the US/China trade deficit has been quite consistent for many months. They don't have February and March's results yet. They still rely on exports to the US.
Trade with China : 2010

NOTE: All figures are in millions of U.S. dollars, and not seasonally adjusted unless otherwise specified.

Month	Exports	Imports	Balance
January 2010	6,888.8	25,185.1	-18,296.3
TOTAL	6,888.8	25,185.1	-18,296.3

January 2009	4,178.1	24,748.0	-20,569.9
February 2009	4,678.4	18,874.5	-14,196.1
March 2009	5,569.9	21,187.7	-15,617.8
April 2009	5,164.9	21,918.7	-16,753.8
May 2009	5,247.8	22,731.5	-17,483.8
June 2009	5,549.2	23,979.1	-18,430.0
July 2009	5,274.3	25,691.2	-20,416.9
August 2009	5,553.1	25,784.7	-20,231.7
September 2009	5,813.7	27,914.9	-22,101.2
October 2009	6,857.4	29,520.8	-22,663.4
November 2009	7,326.3	27,549.9	-20,223.6
December 2009	8,362.9	26,501.0	-18,138.1
TOTAL	69,576.0	296,402.1	-226,826.1

Interestingly US exports to China hit an all time high in Dec 09.

[c1ue]

Re: China Set To Announce Record Trade DEFICIT In March

I do wonder how much of this deficit is due to China's profligate spending of dollars abroad.

Anyone look into this?

[touchring]

Re: China Set To Announce Record Trade DEFICIT In March

I do wonder how much of this deficit is due to China's profligate spending of dollars abroad.

Anyone look into this?

they are busy shifting hills from Australia back to China.

http://seattletimes.nwsource.com/htm...uschina15.html

[jimmygu3]

Re: China Set To Announce Record Trade DEFICIT In March

Camtender,

Not sure if you knew, but grapejelly has been using that avatar for years now. I have read several of your posts and mistakenly thought it was him just by glancing at the avatar. Here's another similar image you could use if you were willing to switch yours to avoid confusion.



-Jimmy

[Camtender]

Re: China Set To Announce Record Trade DEFICIT In March

Camtender,

Not sure if you knew, but grapejelly has been using that avatar for years now. I have read several of your posts and mistakenly thought it was him just by glancing at the avatar. Here's another similar image you could use if you were willing to switch yours to avoid confusion.


-Jimmy

Done, sorry about that.

[hayekvindicated]

Re: China Set To Announce Record Trade DEFICIT In March

they are busy shifting hills from Australia back to China.

http://seattletimes.nwsource.com/htm...uschina15.html

That's an amazing article. Thanks for posting.

The growth of China is disconcerting and frightening.

On a side note, those that bought property in Perth a decade ago must be sitting on a small fortune.

[iyamwutiam]

Re: China Set To Announce Record Trade DEFICIT In March

I find ti amusing that when the US/Aus/UK go into 'developing' coutries and buy mines/huge swaths of land, and all major businesses and banks -this is seen as a clarion call for the merits of democracy and capitalism.

However -should another non-club country try to do the SAME thing -people are 'worried' and in angst. Rather telling..

I for one hope this forebodes a reversal of surplus ridden countries (BRIC and others) to finally invest in their own countries and companies rather than plowing the surplus to nominal interest bonds of foreign countries that are banging at the door with tons of debt -eager to extrcact profit from the very same surplus countries.

I d hope they find the doors increasingly shut.

[hayekvindicated]

Re: China Set To Announce Record Trade DEFICIT In March

I find ti amusing that when the US/Aus/UK go into 'developing' coutries and buy mines/huge swaths of land, and all major businesses and banks -this is seen as a clarion call for the merits of democracy and capitalism.

However -should another non-club country try to do the SAME thing -people are 'worried' and in angst. Rather telling..

I for one hope this forebodes a reversal of surplus ridden countries (BRIC and others) to finally invest in their own countries and companies rather than plowing the surplus to nominal interest bonds of foreign countries that are banging at the door with tons of debt -eager to extrcact profit from the very same surplus countries.

I d hope they find the doors increasingly shut.

When its a country that engages in the most brutal forms of oppression on earth, there are good reasons to be wary.

[GRG55]

Re: China Set To Announce Record Trade DEFICIT In March

I find ti amusing that when the US/Aus/UK go into 'developing' coutries and buy mines/huge swaths of land, and all major businesses and banks -this is seen as a clarion call for the merits of democracy and capitalism.

However -should another non-club country try to do the SAME thing -people are 'worried' and in angst. Rather telling..

I for one hope this forebodes a reversal of surplus ridden countries (BRIC and others) to finally invest in their own countries and companies rather than plowing the surplus to nominal interest bonds of foreign countries that are banging at the door with tons of debt -eager to extrcact profit from the very same surplus countries.

I d hope they find the doors increasingly shut.

Suggest you break out the Econ 101 textbook...no surplus countries if there's no deficit countries. China couldn't do what it has done if the USA didn't do what it has done. There are no innocent or guilty parties in this little game...just different sides of a common coin.

And the screams of anguish eminating from China over the prospects of trade barriers - and not just at that hands of USA - should be ample evidence that the Chinese know full well they are as responsible for the present circumstances as their trade deficit "partners".

[touchring]

Re: China Set To Announce Record Trade DEFICIT In March

And the screams of anguish eminating from China over the prospects of trade barriers - and not just at that hands of USA - should be ample evidence that the Chinese know full well they are as responsible for the present circumstances as their trade deficit "partners".

This is only politics to divert the attention. Tariffs are not the biggest worries of the Chinese government. They are more concerned about the huge real estate bubble they have created. They need to find a scapegoat reason to burst the bubble.

[GRG55]

Re: China Set To Announce Record Trade DEFICIT In March

This is only politics to divert the attention. Tariffs are not the biggest worries of the Chinese government. They are more concerned about the huge real estate bubble they have created. They need to find a scapegoat reason to burst the bubble.

A popped real estate bubble would seem a lesser problem for China compared to the fallout of being blocked from export markets, which could take a big slice out of their mercantile economic model...with nothing yet to replace it.

[GRG55]

Re: China Set To Announce Record Trade DEFICIT In March

they are busy shifting hills from Australia back to China.

http://seattletimes.nwsource.com/htm...uschina15.html

When it comes to China nothing has really changed...

From the linked article:

...Chinese investment has made Graeme Rowley, the outgoing executive director of Fortescue Metals Group, a formidable player in the Australian mining industry.

Last year, Rowley said, Fortescue provided favorable ore prices to a major Chinese steel company in return for a promise of billions of dollars in investment. But the Chinese firm reneged at the last minute. He said that was a sign of things to come.

"Either the Chinese will have to learn to honor contracts or we will have to learn how to operate in a system with less clarity," he said...

In the 1970s China contracted for resources from numerous countries around the world. Back then the investment capital to develop the mines did not come from China, but the financing was backstopped by the Chinese contracts to purchase the output.

As soon as the downturn came in the 1980s the Chinese simply refused to honour the commitments. To this day a "contract" with the Chinese is nothing more than a reason for a future renegotiation...:rolleyes:

[touchring]

Re: China Set To Announce Record Trade DEFICIT In March

When it comes to China nothing has really changed...

From the linked article:

...Chinese investment has made Graeme Rowley, the outgoing executive director of Fortescue Metals Group, a formidable player in the Australian mining industry.

Last year, Rowley said, Fortescue provided favorable ore prices to a major Chinese steel company in return for a promise of billions of dollars in investment. But the Chinese firm reneged at the last minute. He said that was a sign of things to come.

"Either the Chinese will have to learn to honor contracts or we will have to learn how to operate in a system with less clarity," he said...

In the 1970s China contracted for resources from numerous countries around the world. Back then the investment capital to develop the mines did not come from China, but the financing was backstopped by the Chinese contracts to purchase the output.

As soon as the downturn came in the 1980s the Chinese simply refused to honour the commitments. To this day a "contract" with the Chinese is nothing more than a reason for a future renegotiation...:rolleyes:

I've done limited trading in China. From what i've seen, to some of the Chinese businessmen, the only contract that holds water if when money is paid and transferred to their bank account, otherwise it is ok to back out.

Usually some reason is provided, e.g. we're out of stock, the goods were sold to someone else who ordered earlier, we made the mistake, apologies.

A contract for future pricing doesn't mean anything.