Wednesday, Jan 14, 2009
Chinese demand collapsing
ChinaNewsWire: Tough 2008 for China
Demand led deflation altering Chinese inflation. This article,http://www.chinadaily.com.cn/china/2009-01/10/content_7384686.htm, from the China Daily suggests that 2009 will be 0% inflation as measured by CPI. Which means that the UK has a while before any inflationary problems arise. Which is good I suppose...
If the UK savers are really lucky they will be dead before the deflationary period ends, thereby keeping the value of their hard earned coins. But no more holidays or living in Europe ! Sorry.
Posted by stillthinking @ 10:05 AM (479 views) Add Comment
8 Comments
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1. japanese uncle said...
Newspapers here argue that depreciating GBP means price inflation of exported goods (not least from China). Wrong, as Chinese exporters will be dictated by the market=importers=ultimately consumers here, not the other way round, under the globally recessionary climate, in which they have no other outlets for their products. US and Europe are sinking and so is Japan where import of the 'made in China' products had already been stagnated thanks to a few quality issues including food contamination scare. Chinese manufacturers will have to reduce costs by squeezing their workers even harder. Ruthless reality of the 'workshop (or sweatshop?) of the world'
2. stillthinking said...
It will be interesting to see what happens with China. They have abandoned the mandatory capital rules, used to purchase US debt, and in so doing have cheapened internal borrowing. They played the economic growth through exports game for too long, and now have been caught out.
There plan must be to stimulate internal demand and force the "decoupling".
3. mountain goat said...
A lot of China dooming going on here and in the media. They were going to save the world economy 6 months ago, now they are the equivalent of the USA in 1930. Sure their exports have collapsed but their imports have collapsed even more in the past few months that's why they have just run the two largest monthly trade surpluses ever at the end of last year. The Chinese stimulus plan of $586 billion (4 trillion yuan) is 20% of China's gross domestic product (GDP). Compare that to the $1 trillion in U.S. bailouts, which equate to about 8% of GDP. China's stimulus does not depend on foreign buyers of gov debt. China still has a huge rural population which will go from effectively zero to higher the consumption. So internal consumption still has huge potential for growth.
China wont save the world economy but with their FX reserves and trade surplus they are in a position most countries can only dream about. China will certainly be part of my investment themes for the future.
4. bellwether said...
MG you don't get tired of "dooming" on US, Europe or UK so why run to the defence of China who rode the leverage boom as much as anyone else. I know you like gardening but there is nothing essentially noble or entitled about producing.
In GDP terms the Chinese economy was just over a fifth of the US ecomomy in 2007 and that was based on credit bloated exports which have now evaporated. The surplus is nothing if it is not distributed and with a relatively small fraction of GDP going to wages it is difficult to see how this could world, I'd mention also a mentaility of saving rather than spending which will only become stronger as factories close.
China being the US in the 1930's is far closer to the truth than decoupling although I'd agree both are exagerations.
5. bellwether said...
My posts are usually littered by typos ( so no change there) but clarification needed on 4th line "world" should have been "work"
6. rm96696 said...
Does anybody still believe the data produced by the chinese government? Has anybody noticed that they publish data almost in real time (4th quarter gdp statistics are to be published next week. The only other country as quick in producing statistics is singapore, but they only have to cover one city. Chinese data should represent everything from construction in tibet to sales in the chicken markets in guangzhou). Mountain goat...good luck with your investments! (still might beat u.k. property...)
7. mountain goat said...
Stillthinking - I "doom" the countries/business'/individuals who think basing their economy on growing debt is productive. Likewise I have confidence in those who do the opposite, accumulate savings.
Rm96696 - thanks, another country I am interested in is India, once the deflationary crisis we are in plays itself out.
8. mountain goat said...
Here's an article relevant to this thread: China Passes Germany to Become Third-Biggest Economy