Chillin' out till it needs to be funded
In an asymmetrical economic miracle such as China the Dollar’s strengthening has already led to a 6.36 rate to the Dollar contrary to expectations of continuing depreciation to the Dollar. The talks of a hard landing and a squeeze on Exports and Imports in April to single digit less than 3% groth did not help International opinion even as Yuan trade is on the cusp of a break out in global trade partnerships.
May had some astounding figures to put to the Chinese Economic miracle. While contracting Europe did not mean lower value of trade for China, it managed to avoid degroing in Europe for the year to date data keeping Exports and Imports together at 1.3% above 2011 levels in the 5 months, it actually gre trade to the US by 15% in Exports as the Balance of Trade to the US grew to $24.3 B. Industrial production also ticked up in the latest data to 9.6% from a 9.3% score for April while Imports of Copper alone are up 65% year on year
Retail inflation is however a cause for worry as degrowing consumption and continuing stresses on emigration mean that the inflation rate is near 3% a drop of 0.5% in a month while PPI prices are down 1.4% Y/Y. China’s trade surplus is up to $18.7B
Power and crude consumption continued to flail as the first purchases of industrial metals and commodities are likely to add to warehouses before production is organised. In the meantime however China has re signed contracts with Baghdad for Crude whose imports ballooned to 28 MM Tonnes or 6 MBPD a tick of more than 10% fromt he April data when crude refineries had stalled and electricity consumption growth was down to 2.5%
Pork prices have finally ticked down helping inflation but also meaning that consumption will be encouraged after the Chinese staple diet cut into most disposable incomes. The coming stimulus may also be able to add value as Spanish stimulus ups the stakes for growth spending in Europe and real estate is longer a worrying bubble. Lending by China’s Big Four was up to last year’s levels at more than RMB 1.2 T
Fixed asset investment touted as falling for more than a year is still a respectable 20.1% and similarily the GDP groth data lo is expected to be 8% , a large number by any standard. Friday, China cut lending and deposit rates by 0.25% to 3.25% and removed restricted bands on Deposits to around 125 bp wider. Also it plans to introduce tax cuts and Government sponsored public infrastructure projects ( Public works)