China Trade Swoons, Collapse of Containerized Freight Index Hits Worst Level Ever, Global Slowdown Worse than Forecast
- China Trade Swoons, Collapse of Containerized Freight Index Hits Worst Level Ever, Global Slowdown Worse than Forecast
by Wolf Richter, http://wolfstreet.com/
Who is going to pull the global economy out of its funk? No one knows. But it’s not going to be China – regardless of how many more times the central bank is going to tweak its policies and cut interest rates. That’s what China’s trade fiasco is saying.
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Soothsayers were once again shocked on Sunday by just how far China’s imports and exports have deteriorated. Exports dropped 6.9% in October from a year ago, to $192.41 billion, after a 3.7% drop in September, the fourth month in a row of year-over-year declines. Exports had peaked last December at $227.5 billion and have since dropped 15.4%.
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Shipments to the US edged down 0.9% year-over-year, to the EU 2.9%, and to Japan, which is suffering from the Abenomics hangover, 7.7%. Is China’s economy getting the feverishly hoped-for boost from supplying the overseas holiday shopping season? Not yet.
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China has been getting hit by two simultaneous forces: weak global demand and loss of competitiveness due to rising wages, land costs, and other expenses. It’s no longer the low-cost producer. And as it switches to robots for manufacturing, which it is doing at lightning speed, it has to confront a new reality: robots are the great equalizer; unlike labor, they cost the same everywhere.
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Imports plunged 18.8% year-over-year to $130.8 billion, after a 20.4% cliff-dive in September, the 12th month in a row of declines. This isn’t weak global demand, but a swoon in demand in China. Part of the plunge is due to falling commodity prices and weak demand for commodities in China. But even then: for the first three quarters of the year, import volume, which eliminates prices as a factor, was down 4%. Imports peaked in Mark 2013 at $183.1 billion and are now down 28.6%.
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