Experts Were Right, China’s Economy is Recovering. Just NOT as Fast As They Thought

Wednesday, March 11, 2009 16:45
Posted in category The Big Picture

It only takes a day like today to put force analysts to retrace their footsteps, see where they went wrong when calling for a recovery, and then set off on the path to recovery again.

Today’s numbers that China’s February trade figures have PLUMMETED 25.7 % from February 2008 were stunning.  Especially as orders to the US (China’s largest trade partner) fell off more than 45%…

45 percent

What were the analysts expecting?

5 percent

Imports fell at nearly the same pace, but in anther sign that people have yet to understand the fundamentals of the economy, CNN is saying that this 24.1% represents China’s consumers failing to keep up their end of the bargain.

Interesting considering anyone who is operating or monitoring the manufacturing economy would know that the majority of imports from the world are for goods that are reprocessed for export/ manufacturing.  not for consumption.

LCD screens from Korea, recycled Pulp/ paper from the US, Hard wood logs from Indonesia, and so on.  It is all destined for the manufacturing economy

Why I think this needs to be clarified is that while the 25.7% drop in export number is a measure of past performance, the 24.1% drop in imports is a measure of future performance.  That, and let’s assume exports were going to rebound, imports of materials would need to happen (on a broad base) at least 2-3 months in advance or export.

Thus, I predict two things:
(1) Exports will continue to be at least 20% off for the next two months against their 2008 figures
(2) when the manufacturing economy starts turning around, it will be shown thorugh the imports first and then through the exports (2-3 months later).

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8 Responses to “Experts Were Right, China’s Economy is Recovering. Just NOT as Fast As They Thought”

  1. Victor Pan says:

    March 11th, 2009 at 8:28 pm

    You’re absolutely right!

    It is too early to allege a recovery. The fact is, US retailers are keeping on inventory reduction and lowering down their sales forecast. Chinese suppliers are not close to the worst yet.

  2. anon says:

    March 11th, 2009 at 11:14 pm

    one of the few, consistently sober analyses i’ve read at this blog. keep up the great posts!

  3. anon says:

    March 11th, 2009 at 11:16 pm

    (that didn’t come out right…i meant to say this blog is one of the few blogs that consistently offers sober analysis.)

  4. Rich says:

    March 12th, 2009 at 12:02 am

    Victor.

    Interesting you should mention retailers as they are one of the largest groups of concentrated buyers and can have a huge impact. Groups like Home Depot, Lowes, Safeway, etc have all had buying team over here .. but I am seeing these groups now slim down.

    In one case (a hypermarket retailer), an entire floor is in the process of being pink slipped. all this leads me to believe that things are not only going to slow down further, but that when things do start to “pick up”, it will be a process that requires time…. time to staff up, time to reevaluate/ identify suppliers, time to get their supply chain back in order.

    R

  5. Rich says:

    March 12th, 2009 at 12:05 am

    Anon

    Thanks.. I think.

    I wonder if we can ever expect one of the major news groups to begin offering a similar product? Every day is endless talking about the fact that we just need to bottom out… does anyone even know what that means in real terms?

    R

  6. Victor Pan says:

    March 12th, 2009 at 4:33 am

    Rich,

    Valid point. However, opportunity always goes with crisis, especially from a global sourcing point of view. Should that be a good chance for supply chain reorganization?

  7. Rich says:

    March 12th, 2009 at 5:18 am

    Victor.

    In my mind, the opportunities are left to be seen, and will depend heavily on just how much force the impact has on suppliers.

    Using my piece earlier this week and Dane’s interview as reference, if the supplier shock is big enough to knock a big player out of the market, the market conditions may not necessarily improve… equally, if EVERYONE is down, then EVERYONE is in trouble… so not a very clean reorganization.

    However, if the industry sees impacts on the lower end of the supplier market, and that results in more business to the larger suppliers… or allows medium sized suppliers to grow.. then perhaps the end result would be the of an order that the central party has been pushing for… depending on the industry.

    R

  8. Victor Pan says:

    March 12th, 2009 at 6:21 pm

    Agree.