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Asian Focus: China markets dry up making trade goal a pipe dream
In this video, Yvette Roper of TradingFloor.com interviews Andrew Robinson, Market Analyst for Saxo Capital Markets in Singapore, about trade and inflation data in China which is expected to give further indication that the all-important Chinese economy remains vulnerable to the growth issues plaguing most parts of the world. China releases new trade data on October 13 and inflation data on October 15.
Trade suprlus upheld by imports falling at faster pace than exports
Specifically on trade he looks at how Chinese exports and imports are slowing. Exports are struggling but for the moment China's trade balance is being kept in surplus because imports are slowing more than exports. The decline in imports though is concerning because of the negative knock-on effect on the rest of the Asian economies. Achieving the Chinese authorities' goal of 10 percent growth in trade in 2012 is definitely a challenge, says Andrew. China’s total trade volumes in 2010 rose more than 20 percent a year and in 2011 the rate slowed to just above 12 percent a year. This year so far the rate it is down 1 percent on the year.
Impact of easing and other measures
He also comments on the limited impact of Chinese easing measures up to now and the need for great patience or a dramatic turnaround in the fourth quarter if Chinese authorities are to achieve their goal of 10 percent growth in trade this year, which he describes as a pipe dream. In terms of helpful easing measures there's little relief in sight in the short term. The most recent suspension of customs fees on incoming and outgoing goods to China will probably have the quickest effect while infrastructure projects, reserve requirement ratio changes and interest rate cuts have a substantial time lag. "In the meantime we have to be patient and probably have to survive some seriously bad data," says Andrew.
Food inflation a big concern
On inflation he says the serious impact of rising food prices, particularly meat, is a major concern for Chinese authorities. Pork prices across 50 cities have been rising 0.8 percent every 10 days while beef is up 1.5 percent on average for the same period. On the inflation front there's no quick fix as easing measures have no effect. "You can’t fight food inflation with interest rate moves," says Andrew. Meanwhile, the rest of the inflation basket in China is behaving relatively okay and Andrew sees inflation hovering around the 2 percent level for some time.
Yuan status - re-evalutaion takes back seat
Since the quantitative easing measures by the Federal Reserve the dollar-yuan rate has stayed where it is at the bottom of its recent range. There has not been much mention about exchange rate issues from either Chinese or US authorities of late. "Even if you want to devalue your currency to make your exports more attractive if nobody is buying them then there is no point as there is still no market to export to," says Andrew.
See more of Andrew's Asian market commentary on TradingFloor.com
06:30 minutes
Tags: andrew robinson, andrewrobinson, china, cpi, easing, exports, forex, growth, imf, imports, inflation, pboc, renminbi, trade balance, tradingfloor.com, yuan, yvette roper, yvetteroper