Trade Is Down…But China Is Not Out.

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The statistics keep coming, and they keep making gloomy reading – despite China’s continues assertion that it will chase 8 percent growth for 2009.

Trade has more-or-less fallen off a cliff – and consumer confidence has been hit. But the picture, as usual is complex, and China’s massive stimulus is starting to kick in – Standard Chartered Bank thinks a boost may come in the second quarter, and is one of many voices suggesting the package may yet be increased in size.

Michael Pettis on SeekingAlpha reports:

    “…CPI was down 1.6% year on year and PPI was down 4.5%, in line with or slightly below expectations and, according to Bloomberg, the highest rate of deflation among the 78 countries they follow.

    …According to an article in…Xinhua:

    China’s exports plummeted 25.7 percent year-on-year in February, the fourth straight monthly decline, as global demand shrank, the General Administration of Customs said Wednesday. Exports contracted to 64.90 billion U.S. dollars, while imports slumped 24.1 percent to 60.05 billion U.S. dollars. The sharp declines reflected weakening external demand, which would persist throughout the year as the global recession deepened, said Zhang Junsheng, an economics professor at the University of International Business and Economics. “These huge falls were inevitable, given the global downturn,” he said.

    …Exports of labor-intensive products contracted more moderately than total exports, reflecting the government’s moves to raise export rebates starting last July, the agency said. Garment and accessory exports fell 11 percent to 14.62 billion U.S. dollars, while those of toys sank 17.1 percent to 850 million U.S. dollars.”

The post also notes China’s plan to give exporters more assistance, including reduction of export taxes to zero, expansion of export credits, and “all possible measures…”. It also quotes MarketWatch as saying:

    “The bigger shock figure was the decline in the trade surplus to $4.8 billion as exports fell faster than imports,” said [Royal Bank of Scotland’s chief China economist, Ben] Simpfendorfer. “February’s trade surplus typically falls because of seasonally strong commodity imports and seasonally weak consumer exports,” he said. “So, the decline in the trade surplus will likely be reversed next month. Nonetheless, the surplus will not bounce back above a $20 billion monthly rate this year.”

As usual the statistics hide almost as much as they reveal. James Fallows notes, in the Atlantic (h/t @beijingboyce) that the impact of the crisis varies in different parts of China, and that opportunities are emerging:

    “In Beijing, in Shanghai, in Shenzhen, and elsewhere, I’ve recently visited companies that are trying to use the disruption of this moment to enter wholly new markets and do what so few Chinese firms have yet done: make high-tech, high-value products that bring high rewards…

    …In Shenzhen…While many were struggling, some viewed the recession as a chance to move into higher-value work and introduce their own advanced products rather than serving strictly as subcontractors…

    …The most dramatic illustration of a Chinese firm trying to capitalize on this moment occurred in the far-eastern corner of Shenzhen. There, a purely Chinese startup firm called BYD has announced plans that would seem laughable were it not for what the company has already achieved.

    …By 2005, BYD was the leading small-battery company in the world. If you use a cell phone, a digital camera, an iPod, an electric toothbrush, a portable vacuum cleaner, you’re probably using one of its batteries. It employs some 130,000 people at seven main facilities in China. I spent an afternoon touring its Shenzhen works, complete with soccer stadium for employee games, extensive apartment complexes for employees’ families and schools for their children, and gardens with the palm trees that Shenzhen’s tropical climate permits.

    … The new F3DM model [electric car], which I drove around a parking lot, can run for at least 60 miles purely on battery power, after which a gasoline engine kicks in. The iron-based battery recharges fully in seven hours; it is said to be good for well over 1,000 charge/recharge cycles, an unusually high number…The announced retail price for the car is $22,000—expensive in China, cheap in the U.S. or European market, where no comparable plug-in cars are yet on the market.

    …And against the snickering of the U.S. auto press was Warren Buffett’s purchase of 10 percent of the company, for $230 million, late last year.

    …The company’s official goal is to be the biggest automaker in China by 2015, and the biggest in the world by 2025.

    CHINA IS DOWN. It is not out…

So the climb up the value chain continues, even while trade figures fall, and companies at the bottom of the ladder go out of business and put workers out on the street. As usual, there is not one, easy-to-define China for us to consider (except, of course, in the political sense!).

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