This morning has brought more news on the economic theme of late 2018 and early 2019 which is of a slowing. As ever at the beginning of the week it comes from the Far East as eyes turn to China. From the South China Morning Post.
Total exports fell to US$221.25 billion in December, down 1.4 per cent from November, and 4.4 per cent from the same month in 2017, according to data from China’s General Administration of Customs.
This is at least party driven by the ongoing trade war.
The December figures give the first indication of the full impact of the US-China trade war.
Exports in previous months were supported by “front loading” of orders by Chinese producers to beat the planned rise in US tariffs to 25 per cent, scheduled to go into effect on January 1 before Chinese President Xi Jinping and his US counterpart Donald Trump agreed to a 90-day tariff ceasefire in their meeting on December 1.
So we move on noting that external demand for the Chinese economy is showing a sign of weakening and as usual the experts were whistling in the wind.
The December drop – the biggest since December 2016, when China grew at its slowest pace since 1990 – was unexpected, with analysts forecasting a 2 per cent rise, according to a Bloomberg survey.
However in my opinion there was something even more significant which was this.
Total imports fell to US$164.19 billion, a fall of 10 per cent from last month and down 7.6 per cent a year earlier.
This is because falls in import volumes are usually a sign of a weakening economy as lower consumption leads to lower import demand. But to see this fully we need to remind ourselves that the Chinese consume in Yuan and that in it the numbers were down 9.7% on a monthly basis but 3.1% on an annual basis with the difference reflecting a fall in the Yuan. This is quite a change as the numbers for 2018 as a whole showed imports to be 12.9% higher. There is of course an irony in this as we note that imports are a subtraction from GDP ( Gross Domestic Product) numbers so this change will boost it as highlighted below.
Those trade flows still resulted in a trade surplus of $57bn in December, the highest in three years. ( Financial Times)
Although of course contrary to the way the media has reported all this it will be reported in the Chinese GDP data in Yuan as 395 billion.
If we switch to the Financial Times I suspect Donald Trump will be focusing on this bit.
China’s annual trade surplus with the US rose to $323bn for 2018, a jump of more than 17 per cent to the highest level on record, according to Reuters data reaching back to 2006.
Meanwhile there was plenty of food for thought for those in the South China Territories ( Australia) from this bit.
Data also showed that China’s imports of iron ore fell for the first time since 2010, a development that will have impacted commodity exporters.
Xinhua News
It is always interesting to see how things are being reported in China itself so here we go.
China’s foreign trade rose 9.7 percent year on year to a historic high of 30.51 trillion yuan (about 4.5 trillion U.S. dollars) in 2018, the General Administration of Customs (GAC) said Monday……..Exports rose 7.1 percent year on year to 16.42 trillion yuan last year, while imports grew 12.9 percent to 14.09 trillion yuan, resulting in a trade surplus of 2.33 trillion yuan, which narrowed by 18.3 percent.
No mention of any declines but there was space and indeed time to mention something else favourable to China.
Trade with countries along the Belt and Road registered faster-than-average growth, with the trade volume standing at 8.37 trillion yuan, up 13.3 percent year on year.
If we stay with Chinese reporting then we can take a look at the value of the Yuan as well.
The central parity rate of the Chinese currency renminbi, or the yuan, strengthened 349 basis points to 6.7560 against the U.S. dollar Monday, according to the China Foreign Exchange Trade System.
The new rate was the strongest since July 19, 2018, according to data from the system.
Since the beginning of this year, the yuan’s central parity rate has strengthened more than 1.5 percent against the dollar.
Presumably driven by the stronger trade figures… ( sorry couldn’t resist it). But the Bank of China New York branch plays along with the official drumbeat.
China’s economy has been undergoing structural reform with the introduction of various macro-economic policies. The bank believed that the yuan’s strong buying momentum showed world financial markets have restored confidence in the Chinese currency.
“With the deepening of China’s reform and opening-up, steady expansion of the domestic financial market, and the higher status of CNY in the international monetary system, it is expected that investors’ willingness to hold CNY will increase further,” said the bank’s foreign exchange desk.
I must say they do have rather eloquent foreign exchange traders as most of the ones I have met communicate mostly in words with only four letters in them.
Indeed things are even going rather well in space.
To better understand the lunar environment and prepare for a human return to the moon, the Chang’e-4 probe, which has just made the first-ever soft landing on the far side of the moon, carries payloads jointly developed by Chinese, German and Swedish scientists to conduct research.
This of course contrasts with the efforts of the evil capitalist Imperialists.
U.S. space technology firm SpaceX, led by Elon Musk, will lay off about 10 percent of its more than 6,000 employees, according to media reports.
Also there is something which reminds us of the Belt and Road plan.
Passengers waiting to board a train from Nigeria’s capital Abuja on Saturday were wowed when they were informed that the train service had been safely operating for 900 days.
A male voice announced from a public address system that the train service had been in commercial operation for 900 days and without any major accident recorded since its inception.
This Chinese built railway is apparently a modern wonder.
Many looked in amazement, expressing satisfaction at the safe operation of the Abuja-Kaduna train service, the first standard gauge railway in Nigeria and West Africa…..Many looked in amazement, expressing satisfaction at the safe operation of the Abuja-Kaduna train service, the first standard gauge railway in Nigeria and West Africa.
One should not be too churlish as there are plenty of issues both security and otherwise in Nigeria but “many looked in amazement” is the sort of thing written about the first journey’s of George Stephenson and his Rocket back in the day.
Football
Another example of a combination of economics combining with foreign policy is the way Chinese football clubs have been offering very high wages to marquee players. West Ham fans will currently be fearing that Marko Anautovic will leave especially if the rumours of a new £45 million bid plus £300,000 a wage wages are true. But it is hard not to raise a wry smile at this perspective from Barney Ronay of the Guardian.
Marco Arnautović latest: am hearing he will move to a club whose wealth is built on a state-subsidised stadium, owned by “colourful” businessmen and with a manager brought in from Hebei China Fortune… Hang on. No sorry, that’s his current club. My mistake
Comment
It is always difficult to measure an economic slow down because of the way that vested interests and the establishment move to delay and block such efforts. This is how they invariably end up being presented as a surprise. China is of course particularly opaque with much of its data leading people to use alternative measures such as electricity consumption before it too got gamed and manipulated. But we are getting more and more signs of a slowing trend. If we look for other signs then we maybe saw one from Europe earlier as well.
In November 2018 compared with October 2018, seasonally adjusted industrial production fell by 1.7% in the euro
area (EA19) and by 1.3% in the EU28, according to estimates from Eurostat,
Which no doubt reflects this from Reuters.
China car sales fell 13 percent in December, the sixth straight month of declines, bringing annual sales to 28.1 million, down 2.8 percent from a year earlier, China’s Association of Automobile Manufacturers (CAAM) said.
This was against a 3-percent annual growth forecast set at the start of 2018 and is the first time China’s auto market has contracted since the 1990s.
Beneath all this though the move into Africa via the Belt and Road policy continues as seemingly does the football combination of economics and diplomacy. They also seem to have been listening to Pink Floyd.
And if the cloud bursts, thunder in your ear
You shout and no one seems to hear.
And if the band you’re in starts playing different tunes
I’ll see you on the dark side of the moon.