Comments on: The myth that China’s reliance on exports for growth is a myth

By: Guy de Jonquieres

Guy de Jonquieres — Tue, 05 Feb 2008 11:46:49 +0000

Both Brad Setser and, apparently, Hong Liang are behind the curve here. Exports were not an important driver of China’s growth until 2004, after which their contribution increased sharply. However, that surge petered out towards the end of last year: see the World Bank’s latest China Quarterly Review. In any case, the relevant measure here is net exports. And the figures show that the big rise in China’s surplus was due more to a slackening in the pace of import growth than to a super-acceleration of exports.

That much is history. The much more interesting question is how China’s policymakers get themselves out of their current fix. Reflate after the snowstorms and risk seeing price (and asset) inflation spiral upwards? Or return to the previous tightening stance and risk a serious downturn – and a truly terrifying surge in NPLs – just as global growth is weakening? Read the official pronouncements, and the answer appears to be both!

One thing, however, does seem clear: Beijing’s efforts to keep everything going level and steady until the Olympics – in my view, the central priority of recent policy – face serious challenges. The question now is whether they can continue to defer until September the inevitable reckoning.

By: globumedes

globumedes — Thu, 31 Jan 2008 08:07:30 +0000

Hallo

off topic
“Tracking the subprime cisis – update 3″
UBS per 28.Jan.08

1. estimated write-down; (unchanged)
a. Subprime and Alt A, b. LBO, c. ABCP (not incl. 1.), d. CMBS: total 471bn; part of banks 225bn; total market 4150bn

2. anounced write-downs (+11bn)
152bn = 2/3 of total estimated losses of 225bn

3. Not included: CDS maket
ft.com: “In total, we estimate that global losses in CDS markets and the underlying credits they insure would be $365bn-$425bn”
http://www.ft.com/cms/s/0/486fb178-c2b9-11dc-b617-0000779fd2ac.html

4. Total: 1 + 3 = ~840bn

5. What’s about this number?
Fiction or reality?

6. Credit crunch:
840bn minus 150bn(gov.) = 690bn;
Credit market will crunch by factor 10 (money creation); means: 6.9trl.

7. How hard is this hit? How much destruction will it have?

globumedes

By: Dave Chiang

Dave Chiang — Thu, 31 Jan 2008 07:32:22 +0000

Unbelieveably, calling Guangzhou or Beijing China is 5 times cheaper today than a domestic phone call in New Jersey. From my cell phone on the road, through Pingo.com which automatically recognizes your cell phone number, calling China anytime from anywhere is now only 2 cents per minute. Within New Jersey, the Verizon monopoly still charges me 10 cents per minute for a domestic call.

By: Guest

Guest — Thu, 31 Jan 2008 07:24:27 +0000

RBC, 31.01.2008, Moscow 14:49:38.Russia’s GDP went up 8.1 percent to nearly RUB 32.989 trillion (approx. USD 1.35 trillion from USD 0,986 trillion in 2006) in 2007, the Russian Federal State Statistics Service reported today on the basis of preliminary calculation of GDP growth.

By: Dave Chiang

Dave Chiang — Thu, 31 Jan 2008 07:20:17 +0000

Americans who haven’t travelled abroad, and that includes a majority of US citizens, don’t appreciate how small the world is today. At a Changsha City hotel deep within interior China, one can sit at a bar drinking American Budweiser beer, access one’s Verizon e-mail account from your laptop as easily as in your home, and watch ESPN sports on television broadcast in English. And if your still bored, you can access the Roubini RGE website blog which isn’t censored by the Chinese government. In the past summer, I was in Changsha, Guangshou, Shenzhen, and Beijing. The major US mainstream news outlets are NOT censored by the Chinese government (ie. CNN, NYT, MSNBC, WSJ, etc.)

By: Anonymous

Anonymous — Thu, 31 Jan 2008 06:37:15 +0000

“hard to argue that borders no longer matter when governments — who are defined by borders — are adding to their assets at an unimaginable rate.”

Intriguing duel of interpretations.

To paraphrase William Jefferson Clinton, it depends on how the word “matters” matters.

Governments who are defined by borders politically are apparently decreasingly defined by them economically.

Governments matter to currencies, but borders may (China) or may not (US) matter to currencies.

And of course borders have mattered less and less to private sector economics over time.

By: Fabio

Fabio — Thu, 31 Jan 2008 06:17:20 +0000

This blog is so Pacific-centered..
Brad’s remarks on the trade links between China and Europe are always dismissed.
D.Chang, Brad is talking about China’s exports TO EUROPE, not the U.S.
Please take note that right now the EU is the largest world economy with a GDP of 18.2 trillion dollars nominal, versus 13.8 for the US and 3.4 for China

By: AC

AC — Thu, 31 Jan 2008 04:03:29 +0000

Guest — “4. China will feel the impacts of US-recession overproportional. (Walmart factory in China, that produces for the whole world, will see, that the orders even from Africa will go down)”

Even during a world-wide recession, people still buy things and consume. It is possible that they will switch even more to
cheaper goods, which are mostly Chinese-made.

By: bsetser

bsetser — Thu, 31 Jan 2008 04:01:33 +0000

DC is right on the consumption numbers, generally speaking — consumption is around 70% of US, and imports from China are aroud 3% of US GDP (@$400b). I can look up the exact numbers, or they can be found on the bea website (they have a useful interactive table function). 3% though isn’t small — tis roughly equal to US oil imports (tho the oil import bill is now rising faster than imports from cHina). the key though is that it is not balanced — US exports (goods and services) to china are small relative to uS impots, and relative to Chinese purchases of US Debt.

2fish — I disagree with you re: national borders. the border between the “RMB” and the “dollar” is a national border, and it matters very much. the government on one side of the border intervenes massively to keep the value of its currency down, thereby influencing a host of corporate decisions.

national borders also matter immensely for the oil business — see the rise of national oil companies, which often have a monopoly on conducting business inside the borders of their country.

tis hard to argue that borders no longer matter went governments — who are defined by borders — are adding to their assets at an unimaginable rate.

By: Guest

Guest — Thu, 31 Jan 2008 01:37:47 +0000

Hallo

I have the following mechanics concerning Chinese export/import-myths:

1. US: recession–> US demand: down = global Us-demand: down.

2. –> export of all rest-world-exporters to US: down–>rest-world income: down–>rest-world demand: down = total global demand:down

3. the ‘down of total global demand’ will be concentrated in the world factory number 1, in China

4. China will feel the impacts of US-recession overproportional.
(Walmart factory in China, that produces for the whole world, will see, that the orders even from Africa will go down)

5. All depends on the deepness and duration of US-recession.

- If US (and so rest-world) will go the hard way and bring the houdini-part of the financial economy back to reality, then I would prognose the global recession number 1.
The hope would be: hefty pain, but short term pain

- If US thinks (and probably finds some)there is a way out, without taking the full hit at one time or without going down as deep, as the reality demands, then we will see what: soft pain, but long term pain; something very not appetizing.

(I would prefer the hard way: clean the house and then go on.
But that is only because I don’t have the numbers, that Bernanke has: numbers sometimes change perspectives)

globumedes
(ps. on names: Twofish wrote: “Hong Liang is a she ”.
Is she a she because of “Hong” or of “Liang”? Or because of “Hong Liang”?