“Like everyone else, I am curious to see what China’s May trade data tells us. If China truly is going to lead the global recovery, China needs to import more – and not just import more commodities for its (growing) strategic stockpiles.”
Well Brad need restrain his curiosity no longer, since the morning we learnt
China’s exports fell by a record in May as the global recession cut demand for goods produced by the world’s third-largest economy. Overseas sales dropped 26.4 percent in May from a year earlier. That compares with the median estimate for a decline of 23 percent in a Bloomberg News survey of 15 economists, and a 22.6 percent contraction in April.
The decline was the biggest since Bloomberg data began in 1995. And more to the point as far as Brad is concerned China’s imports dropped 25.2 percent last month, compared with a 23 percent fall in April. Hence China just one more time ran an increased trade surplus (up to $13.4bn in May from $13.1bn in April), and it is no clearer to me than it is to Brad how a country running a trade surplus can be leading a surge in global demand. Indeed this months data, far from prodiving evidence of an accelerating "recovery" continues to pointing to ongoing weakness in global demand, just like the evidence we are receiving from Germany, and from Japan.
On the other hand there was a 38.7 percent year on year rise in fixed asset investment in May. This marked a larger increase than in April, when FAI rose 33.9 per cent. For the first five months of this year, investments increased 32.9 per cent from the same period in 2008, compared with 30.5 per cent in the first four months of the year and against an estimate of 31 per cent. According to Alaistair Chan, at Moody’s Economy.com.
“Fixed asset investment in China continues to increase on the back of state-directed projects ... This will help keep the economy growing but there are increasing concerns about the amount of lending that has been required to fund the projects"
Quite. And as a Chinese economist friend wrote me to say: "just how much of current property demand is speculative? I also have my doubts whether even official inventory levels accurately reflect all the inventory out there, especially when I read anecdotes like this ...
As a Beijing homeowner myself, I’ve experienced this puzzling phenomenon firsthand. We have been told that the value of the condo we bought last year has gone up 30% based on sales of new nearby developments, but it’s impossible to confirm since there is no secondary market. Originally we tried to rent the place, but we couldn’t find takers at any price that could remotely cover the mortgage, despite a prime location. When we decided to move in instead, we discovered that while the building was sold out long ago, hardly anyone actually lives there. Same with another 800-unit project down the street: every unit went for top dollar well before completion, but now the lights are off and nobody’s home.
In fact the volume of empty apartments across the country hit 91million sq metres at the end of last year, up 32.3 per cent from a year earlier, according to official figures. But those numbers included neither the huge volumes of completed real estate projects whose owners are waiting for market conditions to improve before they put them on the market, nor the estimated 587 million sq m of apartments sold in the past five years but left empty by their owners.
But finishing up where I started, and with the trade balance, as Brad said: "China needs to import more – and not just import more commodities for its (growing) strategic stockpiles". However, to quote again my Chinese economist friend: And Macroman's data on China's imports of commodities is surreal too. And as Claus Vistesen responded: "Yep, this was what I thought and we should expect Brad Setser to be all over this". We certainly should, we certainly should.
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