All Sorts of Things

Random posts on all sorts of things designed to inform and provoke.

China: Something’s Fishy in the Kung Pao

China is currently going through its once-a-decade political leadership transition and so it makes sense that both sets of leaders – the outgoing and incoming – want to show the world that China is a strong and growing economic powerhouse. Therefore, any economic news coming out of China at this time should be taken with a bag of salt – honestly, it should taken with some salt at all times but especially during important political events such those occurring at this time – and that is why I’m a little suspicious of the great economic data being put forward by Beijing. Data such as that reported over the past few days that states the country’s October exports surpassed expectations and increased 11.6% from a year ago while imports continued to grow at a steady pace of 2.4%. China’s Commerce Minister, Chen Deming, stated that the country’s trade surplus expanded to $32 billion, the biggest in four years, and China’s economy had started to stabilize. On top of this international trade data, the head of China’s National Development and Reform Commission (NDRC), Zhang Ping, said that industrial production, fixed-asset investment and retail sales accelerated in October and the country would achieve the government’s economic growth plans.

This seems like great news not just for China but also for the global economy because that country drives so much of the growth as it fills a large chunk of global demand. This growing export data gives us an idea of global demand that in turn increases our perspective of the world’s economic conditions, especially in Europe and the United States. I am, by the way, not focusing on the political implications of growing Chinese exports flooding western markets and their impact on domestic production, in general, and local manufacturing jobs, in particular. Given these incentives, it makes sense for the global markets to be biased towards this data, hope that its true, and that it directs us towards a reinvigorated economic future.

I, however, am not certain about all this good news especially since some of the other statements made by the Chinese officials contradict their positive data and point towards some trouble ahead for the country’s economic growth. For example, the Commerce Minister stated that China’s trade outlook is grim for the coming months and will be difficult next year while the head of the NRDC stated that his country needs to prepare for prolonged challenges including the debt turmoil in some countries and sluggish global growth while solving issues such as overcapacity. On top of which, foreign trade expanded at a slower pace than at the same time last year, the country’s biggest market, Europe, continues to be hampered by a sovereign-debt crisis resulting in declining sales, and Chen has stated that achieving the full-year target will be very difficult. Since these aren’t new problems and, according to the government officials, will continue to be a drag on the global economy, the question is what accounts for China’s positive economic numbers amidst all this doom and gloom.

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This entry was posted on November 10, 2012 by in Global Economy and tagged , , , .
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