Chillin' out till it needs to be funded
Imports plunged even as domestic policy makers in China continued nodding their head to requests for engendering Domestic demand from trading to a deficit or reducing the trading surplus. Note: The confusion lies in that China becomes stronger with higher surplus in currency trading and in GDP diplomacy, while GDP growth, low at December’s 8.9% needs to clawback growth momentum lost to lower production and higher wages. Thus lower imports mean a significant loss of production to continue in the near future, Chinese relyin gon Services to grow the GDP as was suspected
China’s loosening grip on the yuan however perhaps encourage the nation’s speculators on the obvious strengthening trade on the Yuan when it happens as well leading it to significantly ramp down its metals imports both for manufacturing and for speculation. Of course this is a surmise based on the statistics, which details one of the knotty problems Xi Jinping’s new regime will face from 2012 continuing from its 2010 December period when growth slowdown was locked into. Chinese property has been managed well, but while prce indices outside Shanghai have barely moved, the lack of property demand encourages speculation on whether property controls on mortgages and otherwise will be loosened, the same resulting in another run on China.
However, as may be the case, China’s strong trade surplus figures continue to surprise investors and analysts even as exports fell only 0.5% in December without Europe affecting conditions and imports plunged 15% even as China has already contracted more Oil to replace its Iranian imports from Saudi Arabia
The inflation inched up to 4.5% over the Year of the Dragon holidays but even as Economists forecast lower trade in the first two months as Chinese settle into the new year, the import figure was more than 10% lower than the 3.5% lower estimates. December’s surplus was $16.5 bln and the same has increased to $27.3 bln this month
Liquidity has dried up in the Chinese banking system forcing banks to stop lending to guarantee companies. Huading Guarantees for example has CnY 200 mln in Capital and can guarantee probably CnY 2 bln of Chinese private enterprise debt. Guarantee companies grew 70% in 2010 to just less than a CnY 1Tln in 2010 debt guarantees for other loans. Chinese long term debt issuance target in 2012 is close to CnY 9 Tln, up 15-20% on 2011 targets, even as Local LGFVs have to be integrateed int o balance sheets, strained despite new Capital injections from the government.
Chinese Fax machines are their biggest export and that is the part of the problem even as they tom tom the strategy of building international export bases while the drop in imports is mostly seen by analysts closer to China as a result of weak domestic demand.