Friday, February 10, 2012

The Chinese Inflation Trap; Or, Why the Consensus Can Eat It

China posted trade data for January today, following up on a flurry of interesting data points:
YoY Exports (White line) & YoY Imports (Blue line) - 2006-2012
Despite the focus on the potential drag from a European slowdown on China, exports, which were stagnant year over year, are essentially beside the point.  The real issue is the unsustainable domestic investment economy and with exports flat YoY and imports down 15% YoY this is a terrible data point.  There as been a lot of discussion about the comparability of the data owing to the impact of the New Year’s holiday (although the Customs Administration does seasonally adjust their figures), but I believe there is an increasingly clear downward trend in the more reliable data available.  For those not up to speed, this is my perspective on China.  It is not positive.  I’ll return to the bigger picture in a moment, but for now I’d like to return to a subject previously discussed here.  

Friday, February 3, 2012

China Data Point Du Jour & the Ozzie Commodity Boom

Courtesy of the Reserve Bank of Australia:

Seems to correspond to a lot of the non-manipulated data we've seen of late.

Australia is an interesting corollary for China observers due to the impact of Chinese commodity demand on the country's booming resource sector.  As a reminder, about 1/4 of commodity revenues in Australia are from iron ore and around 1/3 come from coal.  China buys almost all of the iron ore in the global export market while demand for coking and thermal coal is also substantial if not quite as dramatic.  With Australia a cheaper option for Chinese mills than long-hauling ore from Brazil, and with lower cost coal mines than China's domestic producers, the Australian resource sector has been on an almost uninterrupted tear for almost a decade.