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Thursday, July 12, 2012

Chinese GDP

I never have too much faith in these numbers, but China reported Q2 GDP at 1.8%, which is equivalent to about a 7.3 or 7.4% annual increase. This takes the rolling four-quarter GDP increase to 7.6%. Since we are now at the target levels, everyone anticipates that China will do more stimulating. The question is how much it can do, and what the negative consequences will be. Their last attempt had some very negative consequences, and the current government is reluctant to jump into the deep end of the stimulus pool again.

The US has now outstripped the EU as China's largest export market, so the US retail outlook assumes even more significance for China. This is not good news for China!

An alternate measure of economic growth trends in China is power output. We only have that through May, but the accumulated (YTD) growth rate and YoY were 5.5% and 4.5% (see the bottom of this release).  In the Jan-Feb period the YoY was 9.7%, so you can see that a very real degradation has developed. In May of 2011, the increase was 11% and 10.9%. 

Singapore contracted in the quarter, due to manufacturing. It was a small contraction, but their YoY real GDP increase is 1.9% following 1.4% in the previous quarter, and this is pretty darned bad for Singapore. However they have capacity constraints of different kinds, and domestically-generated GDP would be higher were this not so. It is, however, a measure of growing weakness in the region.

This is not good news for China!

Perhaps there is a backup plan.

Joke: The Three Worst Chinese Tortures Known to Man

I'm comparing MZM divided by wages to the inverse of the 10-year treasury yield. There is an amazing amount of correlation here.

Interest Rate Epiphany (Must See Charts)
A whole world full of negative consequences is not as bad as losing the Mandate of Heaven. The Bling Dynasty will do anything to stop that.
Who Struck John,

In honor of your Bling Dynasty and Mandate of Heaven, I thought I'd offer a martial arts reference. What I got was so much more.

Enter the Panda

Our goal is simple - to provide all our clients, both large and small, with a safe, value added, quality assured means of doing business in China.

We only work with factories we have personall visited and approved, to ensure your products reach you on time, within your budget and most importantly to a quality and standard that you can be proud of.


They "personall" visit each factory to ensure that their exacting quality standards are met. Invest with confidence.

Thank you, but I've actually studied east Asian history ... and have no interest in being fleeced. Anyone who studies the past behavior of the merchant class there will quickly realize that there is nothing new under the sun.
WSJ: Anyone who has worked with Chinese businessmen for longer than ten minutes ought to realize what kind of business practices they espouse. When they shift gears from "we've never done X" to "yes, we have many customers we provide X for" in two minutes flat, without batting an eye, you know you're dealing with liars.
Who Struck John & Neil,

Me profit you long time.

(Shame on me.)
Neil - I think the attitude you mention is one of their main economic problems!
Those attitudes are culturally ingrained in the merchant class; they have a 3,500 year track record.
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