The big test this week of the bearishness or otherwise among investors about China’s economy will come with the release of the March quarter GDP data, plus figures on industrial production, investment and retail sales.
The figures all emerge Wednesday lunchtime in Australia.
A slew of analysts have already chopped their estimates to the range of an annual growth rate of 7% to 7.6%, with most estimates coming in around 7.2% – 7.4% from the 7.7% annual rate in the December quarter of 2013.
If the figure is below that, then watch the chorus of ‘China slowing, all bad’ forecasts from the bears, especially after last week’s data on trade (which was misunderstood by most analysts and inflation.
The bears have been wrong on China quite a few times, and again this year especially on iron ore prices (up from the lows of early March when the forecast was for more falls) and the volume of imports hasn’t slackened off, despite forecasts that that would happen.
In fact Chinese iron ore imports surged in March as did imports over the quarter – but this was ignored by most local and many analysts.
Friday’s inflation figures were more of the same – the annual rate in March rose to 2.4% (the government target is 3.5%), from 2% in February (both from year earlier).
But inflation fell 0.5% from February to March, which caused some analysts to link that to the slower level of activity in the economy and start wondering about deflation (as the same analysts are wondering about weak price growth in Europe).
Some analysts also linked the weak consumer price performance to the deflation in producer prices – they fell more than 2% in March (annual) the 35th such monthly fall in a row.
And yet those same analysts failed to mention that the weakness in producer prices (they were down more than 6% two years ago) haven’t dragged consumer prices into deflation.
Certainly there’s a touch of disinflation in consumer prices, but not deflation.
For example food prices fell 4.1%, and non-food prices were only up an annual 1.5% in March, indicating there are no inflation pressures at all.
And then there was the sharp fall in 18% exports in March, which most analysts misread completely.
As the AMP’s Dr Shane Oliver pointed out, if you strip out the sharp fall in exports to hong Kong and Taiwan, Chinese exports to the rest of the world were up by close to 8% in March.
Dr Oliver pointed out that the exports to Hong Kong and Taiwan fell by around 40% from March 2013 – and that fall resulted from a crackdown on over-invoicing a year ago as companies large and small tried to import capital to ride the Chinese currency higher.
That has now ended, with the crackdown, and the engineered fall in the value of the yuan over the last two months.
The 11.3% fall in imports in March is more of a worry as it reflects weak Chinese demand.
But while imports of oil and soybeans, for instance fell last month, inbound shipments of iron ore and copper were at high levels.
The rise in iron ore imports makes a mockery of all that handwringing in Australian media about the weakness in China’s trade account and economy.
The economy is sluggish, the financial system is strained, but none of this is terminal or heading towards a crunch.
Chinese customs data revealed that iron ore imports jumped 21% to 73.96 million tonnes last month, from 61.24 million tonnes in February.
Imports were almost 15% above the level for March 2013.
First-quarter imports surged 19.4% to 222 million tonnes from the same period of last year.
Shipments hit a record high of 86.82 million tonnes in January, as steelmakers built stocks ahead of the Lunar New Year shutdown.
Iron ore exports to China from Australia’s Port Hedland, which account for about a fifth of the globally traded market, jumped 27% in March from February to 27 million tonnes, a sure sign that the Chinese steel industry bought more ore in the month.
Iron ore prices fell by around 8% in March, but have since recovered part of that loss. They rose above $US119 a tonne on Friday.
But it is clear the Chinese mills have used the price weakness, to top up stocks of high grade ore, such as the 62 Fe product BHP and Rio Tinto ship.
Copper imports also rose 10.8% to 420,000 tonnes in March from February. The boost to imports came as copper prices eased for most of March (they are off more than 9% this year).
March’s imports were almost double the imports of refined copper in March 2013 of 218,823 tonnes last month.
Imports of soybeans inched down slightly to 4.62 million tonnes in March from 4.808 million tonnes in the previous month, as price weakness in China saw processors put a hold on purchases. There have also been reports of soybean cargos being defaulted upon by Chinese buyers.
And China imported 23.52 million tonnes, or 5.54 million barrels per day (bpd), of oil in March, down 7.8% on a daily basis from 6.01 million bpd in February.
Over the three months to March, China’s crude imports rose 8.3% from a year earlier to 74.72 million tonnes, or 6.06 million bpd.
China’s crude intake in March was the lowest since imports dropped to a 13-month low of 4.81 million bpd last October.
Analysts said several big refineries were closed or running lower production levels for maintenance.
