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US GDP Alert: China Exports Surge On US Stimulus

  • Written by Syndicated Publisher No Comments Comments
    July 11, 2011

    So much for China converting from an export-led economy to a consumer-driven society. In June, the Chinese trade balance soared to $22.3 billion, nearly double the consistently clueless economist consensus of $14.2 billion. The surplus was $13.1 billion the previous month and $20 billion a year earlier. This was a result of an all time record in gross exports which hit $162 billion in June, driven by all time high exports to both the US and the EU, at $28 billion and $30.3 billion, respectively. Also, the surge in Chinese exports to the US in June to a near record $19.1 billion (lower than just the $19.4 billion in July 2010), means that the official read of the US trade deficit which will be reported on Tuesday, will almost certainly spike, pushing GDP expectations lower yet again. This is precisely the last news China needed as the surge in new money entering the economy will merely hasten an already overheating economy, and following yesterday’s announcement of June CPI coming in at 6.4%, it likely means that the PBoC’s statement that inflation is now under control is full of hot air. It also likely means many more attempts at tightening are imminent: expect another RRR hike within a few weeks. Per Bloomberg: “The surplus adds to the cash flooding the economy and complicates Premier Wen Jiabao’s efforts to cool the fastest inflation in three years. Policy makers are seeking to rein in price gains that are stoking social discontent without choking off growth that’s already showing signs of slowing. “We don’t think the PBOC will halt monetary tightening soon,” said Liu Li-Gang, head of Greater China economic research at Australia & New Zealand Banking Corp. in Hong Kong. The central bank will increase bill sales to soak up the extra liquidity from the trade surplus and prevent it from boosting money supply, he said.” It also likely means that repo rates and SHIBOR will continue their inexorable trek higher as the Chinese central bank is the latest to find itself between the rock of short-end liquidity constraints, and the hard place of long-term “anchored” inflation expectations.

    Yet while in the past China trade has swung widely and even had trade deficits around the time of its new year, which was explained away as a one time event, June’s surge in the trade surplus may also be an aberration: “China’s competitive advantage is also being tested by higher labor costs and yuan appreciation, Zheng from the customs bureau said today. Companies including Nike Inc. are switching production to Asian countries where wages are lower, contributing to the moderation in export growth. Vietnam surpassed China last year to become the biggest supplier of footwear to the world’s largest sportswear company, according to its annual report.” If that is indeed the case and the politburo is simply massaging numbers to hide the drop in its export base, the adverse derivative consequences will be a lower capacity to buy both US paper and Euros: two critical ongoing events which have so far permitted the ponzi to continue as long as it has.

    How about imports?…

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    Chinese Exports Surge To Record, As Trade Surplus Comes At Almost Double The Consensus: More Bad News For US GDP? | zero hedge.

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