everything: Oh China - Where Are Your Exports?

Mentioned by Paul Krugman and highlighted in the posting Paul Krugman On The Dismal Employees Work Hours

Brad Setser also brings us some disappointing news from Korea, which “reports its trade data faster than anyone”, making it a sort of leading indicator.

Now the same posting is also mentioned by Edward Hugh on his posting China's Imports and Global Recovery - Brad Setser Need Be Curious No Longer ( DO give it a read. :D )

Earlier this week Brad Setser was opining on his blog:

“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.”

What matters is not so much the fact that imports are rising, but what exactly the imports are. There is substantial evidence accumulating that - as Brad suggests - China is simply stockpiling commodities as a hedge against future inflation. Some of the best evidence for this came here, yesterday. If this picture is correct, then the situation is unsustainable, as is the run up in commodity prices and stocks which have accompanied it.

So, and finishing up where I started, 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: Macroman's data on China's imports of commodities is surreal too.

Ah Macro Man's The China Syndrome is a good read too!

Drilling down beneath the surface, however, we see a picture that is much less unequivocally bullish for commodities. While overall imports have barely started to recover in value terms, many commodity imports have absolutely skyrockjeted in volume terms. And at the end of the day, the inputs to China's industrial and investment complex are based on volume, not value.

And Macro Man has followed up with another great posting Chinese Takeaway today.

China has engineered its own recovery, etc. OK, fine. To be sure, a goodly portion of of this investment has gone into infrastructure projects, particularly in western China. That is pretty valuable.

But capex growth keeps humming along....does the world really need more manufacturing capacity at this juncture? And readers are invited to judge for themselves how sustainable/healthy/desirable it is to see property investment starting to surge again.

One of the great things about trade figures in China is that they one of the few datapoints that you can be pretty sure aren't fudged or manaipulated too badly, since they can be corroborated with similar statistics from China's trading partners. In that vein, it's worth noting a remarkable disparity in China's PMI and its export data. While the PMI accurately herladed the collapse in export growth, to date its rebound has not been matched by a similar renaissance in export data.

This, of course, begs the question of who the Chinese plan on selling to. It's all well and good continuing to build factories and export capacity, but the real world isn't like Field of Dreams; just because you build it doesn't mean that customers will come. Yesterday's US trade figures were telling in that regard. Imports declined again in April; while an inveterate "second derivative" believer may find reasons for optimism in the slight lessening of the pace of import decline in yesterday's data, Macro Man is rather more sceptical. And the fact that US exports declined as well suggests that domestic demand in the rest of the world remains flaccid at best.

Ah the inventory issue. Remember the issue of asking what if the iron ore shipments were nothing but inventory purchase? Yes, nothing but stockpiling!

Also as mentioned by Alan Kohler in A green shoot withers

In fact the iron ore unloaded in China this year is being stockpiled, mostly at or near the ports. Those facilities are now full.

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