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China's Export Earnings "grim"

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http://www.cnbc.com/id/38318759

China Says Exports Outlook 'Grim' on Europe Demand

Published: Tuesday, 20 Jul 2010 | 12:51 AM ET

By: Reuters

China sounded a gloomy note on Tuesday about its export prospects, warning in particular that belt-tightening by deeply indebted European Union governments would dampen demand for the country's goods.

Calling the trade picture "still complicated and grim", the Ministry of Commerce said high growth in exports in the first half would give way to slow growth in the second half.

"The sovereign debt crisis has made many EU countries shift to fiscal austerity from fiscal expansion, which will greatly restrict consumption and investment growth in the EU," the ministry's spokesman, Yao Jian, told a news conference.

Cheap, labour-intensive products would be less vulnerable to drooping European demand than more expensive, discretionary goods, he added.

Spain, Italy, Germany and non-euro member Britain are among EU countries that are tightening their budgets after Greece had to be bailed out in April, raising a red flag about the sustainability of public finances across Europe.

Furthermore, Brazil, India and other emerging economies have started to tighten monetary policy, the Commerce Ministry said.

"The room for the further growth of Chinese exports is limited," Yao said.

As a result, the ministry would keep in place policies aimed at supporting external demand for Chinese goods, including retaining export tax rebates.

Chinese exports grew 43.9 percent in June from a year earlier, beating forecasts, after 48.5 percent year-on-year growth in May. However, imports have also boomed, meaning net exports barely contributed to first-half growth in gross domestic product, according to the National Bureau of Statistics.

Export growth in the second half of this year will slow to just 16.3 percent, giving full-year growth of about 24.5 percent, the State Information Centre, a leading government think tank, said in a report published on Monday.

Slowing into 2011

Wang Jun, a researcher with the China Center for International Economic Exchange, a think tank under the National Development and Reform Commission, agreed that China could not escape the fallout of the euro zone's debt troubles.

"I think growth in China's exports will show a big slowdown, especially in the fourth quarter. It's very likely that we'll see single-digit growth by the end of this year," he told a forum.

A staunch defender of China's exporters, the Ministry of Commerce has a tendency to stress the difficulties facing the sector rather than to point out that China has considerably increased its share of global markets during the economic crisis.

But the Ministry of Industry and Information Technology also raised questions about the robustness of China's export rebound due to the weak foundation of the world recovery.

"Although the economy is heading in the right direction, there are many difficulties and problems," Zhu Hongren, a spokesman for the ministry, told a separate news conference.

A lot of small export firms were experiencing financing strains, while wages had gone up by more than a fifth in the manufacturing strongholds of the Yangtze and Pearl River Deltas.

Like exports, factory growth would slow over the rest of 2010 because of a high base of comparison in 2009, the ministry said.

But Zhu said the moderation would help China to upgrade its economy and lay the basis for more sustainable growth.

"The slowdown is not only appropriate, but will also help to facilitate adjustment in China's industrial structure and economic growth," he said.

Time to Start Easing?

Beijing is redoubling its efforts to weed out obsolete, energy-guzzling plants in a drive to meet ambitious energy-intensity targets by the end of 2010.

China has overtaken the United States as the world's largest energy consumer, according to the International Energy Agency, an assertion denied on Tuesday by a Chinese official.

Despite the expected slowdown, full-year factory output growth may be higher than the 11 percent targeted at the start of 2010, the Ministry of Industry said.

The Ministry of Commerce was also optimistic about consumer spending. Retail sales would keep growing rapidly over the rest of 2010 thanks to rising incomes and government policies to encourage consumption, the ministry said.

Overall, economists expect a further slowdown in economic growth, which moderated to an annual rate of 10.3 percent last quarter from 11.9 percent in the first three months of 2010.

"With growing signs of economic slowdown, we believe that the government will now start to discuss possible policy adjustments," Ha Jiming and Xing Ziqiang, economists at China International Capital Corp, said in a report.

The government could accelerate the approval of investment projects, relax curbs on property speculation and loosen its liquidity controls in addition to keeping interest rates and banks' required reserves unchanged, they said.

Looks like China is about to hit the skids. Will they go to super-loose monetary policy, even more extreme lending and QE, or start to tighten like the West?

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Anecdotal I know but my OH is always buying electronic components from china. Some of these companies are now finding that air freight isn't coming over as regularly as it used to, so there are quite big delays on stuff. Whether that's the exact reason or not who knows, but looks like things are getting tough all over the place)

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Anecdotal I know but my OH is always buying electronic components from china. Some of these companies are now finding that air freight isn't coming over as regularly as it used to, so there are quite big delays on stuff. Whether that's the exact reason or not who knows, but looks like things are getting tough all over the place)

Although we'll have Bardon et al turn up and tell us that there's huge internal demand in China and that everything is fine, Chinese consumers just WILL NOT replace the 300 million consumers in the US and the 550 million consumers in the EU and UK. They just won't.

And with the EU chamber of commerce constantly warning that China has kept adding more and more manufacturing and export capacity for the last 10 years, there really was only one game in town.

Now that game has come to an end. We're hearing stories of China mothballing the most inefficient factories to cut emissions but that's just a cover-up. Truth is, they have huge over-capacity and hundreds of millions of people who have migrated from the countryside into the cities and enterprise zones to find their middle-class lifestyles.

What will happen when they find out the jobs don't exist anymore?

It's a long shot, but I'm going to suggest that there could be revolution in the next 10 years. If China wants to rule the world, it'll have to be a democracy first.

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It's going to get interesting.

Everyone is turning to manufacturing but who's going to buy. We can't all create manufacturing jobs without the manufacturing nations being affected.

Agreed. It's as though "they" think the human race can't progress without demand and consumption. I'm sure it can.

I think the next few years will highlight why the EU and Euro was necessary. China isn't going to be stable enough to assume the leadership role and the US is about to become a lot less capable of continuing to hold it.

Edited by AvidFan

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My 2€ worth. Was looking to buy a new kettle after the previous one, a Philips, finally died after 15yrs good and loyal service ;)

Of the 10 on show at the local supermarket, all but one was "Made In China". And for the spec, quality etc it was in the same price bracket.

There was a cheap and nasty own brand that looked liked it might electrocute the wife the first time she turned it on, but I decided against buying it :P

So, we bought a Philips again. No longer "Made In Netherlands" like 15yrs ago, but "Made In Poland". Times have changed, but I'd rather give my euros to companies investing in the EU than sweat-shop China. Just my personal choice.............

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My 2€ worth. Was looking to buy a new kettle after the previous one, a Philips, finally died after 15yrs good and loyal service ;)

Of the 10 on show at the local supermarket, all but one was "Made In China". And for the spec, quality etc it was in the same price bracket.

There was a cheap and nasty own brand that looked liked it might electrocute the wife the first time she turned it on, but I decided against buying it :P

So, we bought a Philips again. No longer "Made In Netherlands" like 15yrs ago, but "Made In Poland". Times have changed, but I'd rather give my euros to companies investing in the EU than sweat-shop China. Just my personal choice.............

With Oil at 80 dollars it is cheaper to make goods for sale in Europe in Hungary, Romania, etc.

This is Chinas problem now, but does not mean that it solves our manfacturing problems.

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.....one consolation for China, they can always sell to themselves. ;)

Maybe they could start a 30-year credit cycle to help facilitate that?

Edited by AvidFan

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Maybe they could start a 30-year credit cycle to help facilitate that?

The Chinese do like the good things in life...all they need to do is get together a decent welfare state, then they will be up and running. ;)

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The Chinese do like the good things in life...all they need to do is get together a decent welfare state, then they will be up and running. ;)

And don't forget final salary pension schemes. That'll add a warm feeling of security and never ending wealth and success...

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And don't forget final salary pension schemes. That'll add a warm feeling of security and never ending wealth and success...

...all that money to spend, that should keep employment high and the factories going. ;)

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Wealth is simply productivity

Is china and its citizens getting more productive? Yes, so they will get wealthier

Is the west getting more productive? Probably but nowhere near as quickly but we have already have a high level of productivity.

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Whatever it is, that is made in China, I have one, and it won't wear out for a few years! :blink:

They will have to search for new markets, probably off-planet!

Edited by MrPin

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Now that game has come to an end. We're hearing stories of China mothballing the most inefficient factories to cut emissions but that's just a cover-up. Truth is, they have huge over-capacity and hundreds of millions of people who have migrated from the countryside into the cities and enterprise zones to find their middle-class lifestyles.

What will happen when they find out the jobs don't exist anymore?

It's a long shot, but I'm going to suggest that there could be revolution in the next 10 years. If China wants to rule the world, it'll have to be a democracy first.

:lol::lol::lol:

Middle class lifestyle's my ****! Like the secretly poor "middle class" woman who couldn't always afford food.

And as for democracy, well that's been a stunning success lately hasn't it?

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And don't forget final salary pension schemes. That'll add a warm feeling of security and never ending wealth and success...

The west can no longer afford to pay the pensions or the wages.....the only work left will be working for the elderly public sector pensioners, wiping their bottoms. ;)

Edited by winkie

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...

It's a long shot, but I'm going to suggest that there could be revolution in the next 10 years. If China wants to rule the world, it'll have to be a democracy first.

I disagree, If China wants to rule the world, it'll have to be a proper totalitarian dictatorship first.

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  • 140 Brexit, House prices and Summer 2020

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