As we wrote yesterday, don’t count too much on China quickly dragging us in Australia from whatever hole we are in, despite optimism in the Federal Budget that it might.
For the second day this week, a major series of Chinese economic statistics have disappointed.
Tuesday it was exports and imports which were lower than forecast by the market, and in the case of exports, down on March.
(Exports declined 22.6% in April from April last year.)
Yesterday it was industrial production, up 7.3% last month from April 2008, but down on March’s figure of 8.3%.
January and February (combined) saw growth of 3.8% for holiday and other reasons.
A year ago in the 12 months to April 2008 production jumped 15.7%, so the slow down since then has been and remains significant.
Economists had forecast an 8.6% rise, so again a major miss for analysts after they missed the downturn in exports.
Surging investment, record bank lending (which was hauled back last month though) and climbing auto sales (up 37% in April alone) signal that the government’s $US586 billion stimulus is having a positive impact on the Chinese economy, but we might have to wait a few more months to find out if it is reviving it and driving new growth.
The rise in output is enough to keep the Chinese economy ticking over, but not enough to push exports up.
April saw China import record amounts of copper, aluminium, zinc, nickel and iron ore, in each case beating the previous record set in March.
But this is for stockpiles, China’s depressed steel, non-ferrous and other manufacturers would be booming, if they needed record amounts of key raw materials.
Steel isn’t, production fell in April.
China has a history of stockpiling, especially in strategic metals. The imports have little relationship some months to actual production or levels of demand.
Chinese GDP eased to an annual 6.1% in the March quarter. On the information flow so far for April, there will have to be a significant pick up in May and June for that figure to be bettered in this quarter.
Australia wants it to be better, as does the Chinese government.
Analysts say industrial production is lagging the rise in the broader economy, but they don’t explain how something as central as production in an economy like China’s isn’t being impacted by the stimulus spending.
Analysts say Chinese companies are very reluctant to increase production when external demand is so uncertain, but the stimulus is designed to give the domestic economy a boost, not the export sector, although some policies on taxes, tariffs and other charges have been altered to make it easier and more profitable to ship overseas.
Chinese spending on fixed investment is rising, and there are signs of life in property and in some sectors of the industrial economy.
Retail sales rose 14.8% in April, compared with the 14.7% rise in March.
New lending has already topped the 5 trillion Yuan government target for the year, and copper and aluminum imports rose to records in April (helping western producers achieve better than anticipated prices, given the slack demand from other economies).
China has also been buying more cotton and soybeans plus some corn to stockpile.
The Chinese central bank has cautioned that the foundations for a recovery were not yet solid. That'[s very accurate at the moment.
