"It's an ill wind....."

Discussion of current events
neverfail
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"It's an ill wind....."

Post by neverfail » Thu Jul 04, 2019 4:10 pm

Vietnam biggest winner from first year of the US-China trade war as supply chains shift, report shows.
The economy of the southeast Asian nation was boosted by almost 8 per cent due to the shift in production as importers sought to avoid Donald Trump’s tariffs
Analysis by Japanese investment bank Nomura also shows that trade diversion benefited Taiwan, South Korea, Chile, Malaysia and Argentina.

https://www.scmp.com/economy/global-eco ... war-supply
The shift in supply chains has shaved 0.5 per cent from China’s GDP this year, compared with 0.3 per cent in the US, since exports to US made up a larger share of China’s economy, according to the research.
The problem (not mentioned in the article) there being that while the tariff war impact on the PRC might be proportionately bigger than on the US, since the PRC economy appears to be growing at a considerably faster rate than the US economy it can afford the loss better than the US can.

(It reminds me somewhat of the Battle of Kursk: the biggest tank battle in history that took place on the plains of Russia during WW2. It is estimated that for an average of each one German tank that the Soviets were able to destroy or disable the Germans were able to knock out an average of 10 Soviet tanks. Despite that the Soviet side still won the tank battle because the USSR was by then outproducing Nazi Germany in tank production so greatly that they could afford the loss. Now if you can apply the analogy to the Trump-China trade war then it could well turn out that the Americans are playing the approximate role of the Germans at Kursk and the PRC that of the Soviet side.)

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cassowary
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Re: "It's an ill wind....."

Post by cassowary » Thu Jul 04, 2019 8:55 pm

neverfail wrote:
Thu Jul 04, 2019 4:10 pm
Vietnam biggest winner from first year of the US-China trade war as supply chains shift, report shows.
The economy of the southeast Asian nation was boosted by almost 8 per cent due to the shift in production as importers sought to avoid Donald Trump’s tariffs
Analysis by Japanese investment bank Nomura also shows that trade diversion benefited Taiwan, South Korea, Chile, Malaysia and Argentina.

https://www.scmp.com/economy/global-eco ... war-supply
The shift in supply chains has shaved 0.5 per cent from China’s GDP this year, compared with 0.3 per cent in the US, since exports to US made up a larger share of China’s economy, according to the research.
This means the US inflation will be low because Chinese goods are being replaced by cheap Vietnamese and other goods.

In turn, this means that the Fed will likely cut interest rates.

Factories shutting down in China and shifting else where will cause social disturbances in China. This is the economic equivalent of war. You don’t need bombs to destroy factories.
The Imp :D

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cassowary
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Re: "It's an ill wind....."

Post by cassowary » Thu Jul 04, 2019 9:17 pm

Another thing. We don't know what China's real GDP growth rate is. The official number is probably inflated.

China’s GDP growth could be half of reported number, says US economist at prominent Chinese university

I wonder if the professor still has a job in Peking University.
The Imp :D

neverfail
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Re: "It's an ill wind....."

Post by neverfail » Fri Jul 05, 2019 1:35 am

cassowary wrote:
Thu Jul 04, 2019 9:17 pm
Another thing. We don't know what China's real GDP growth rate is. The official number is probably inflated.

China’s GDP growth could be half of reported number, says US economist at prominent Chinese university

I wonder if the professor still has a job in Peking University.
Professor Pettis may even be right and the PRC statistics might even be cooked. So while we cannot prove it unequivocally we can get an indication of the health of the PRC economy by checking up on its imports. Imports are harder to lie about because you can always double check them against the equivalent export statistics from the supplier countries:

1. Iron ore

China iron ore imports fall to 18-month low in April as Brazil shipments slide. ... For the first four months of 2019, China imported 340.21 million tonnes of iron ore, customs data showed, down 3.7 percent from 353.32 million tonnes in the same period last year.May 7, 2019

https://www.reuters.com/...china...iron ... onth-low-i...

No one buys iron ore unless they plan to smelt ferrous metals. The shortfall of imports (bearing in mind that the shortfall of exports from Brazil have been made up by increased imports from Australia (where else?) it indicates a slight reduction in iron and steel production: likely in response to reduced demand. Of course trump's 25% tariff increase on steel imported from the PRC might be largely to blame for that.

By the way; iron ore prices are currently strong.

Oil

2. Oil, is arguably a more sensitive indicator to the health or otherwise of their national economy as it applies to transport as well as industry.

https://oilprice.com/Latest-Energy-News ... iners.html
China Grants More Crude Oil Import Quotas To Refiners
This indicates steadily rising demand and follows on from the trend of recent years:

https://www.ceicdata.com/en/indicator/c ... il-imports
China’s Crude Oil: Imports was reported at 9,261.414 Barrel/Day th in Dec 2018. This records an increase from the previous number of 8,425.684 Barrel/Day rh for Dec 2017.
copper

Another key indicator of industrial activity.

https://www.bloomberg.com/news/articles ... rts-demand
China Copper Imports Drop as Weak Economic Outlook Hurts Demand
As the article explains part of the reason for the fall in in imports has been a considerable increase in China's own copper smelting capacity. But has this been matched by a similar expansion of copper mining within China?

https://tradingeconomics.com/china/impo ... oncentrate

Imports of ores and concentrates are up.

Summary. Trumps tariffs seem to have had only a marginal impact on the health of the PRC economy. The overall recent trend of its imports of key industrial materials indicates (agreed) a slowdown compared to previous years but the PRC still enjoys robust growth.

Which supports my impression that in the Trump-China tariff raising race to the bottom the USA may well win by falling into recession first.

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cassowary
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Re: "It's an ill wind....."

Post by cassowary » Fri Jul 05, 2019 2:32 am

neverfail wrote:
Fri Jul 05, 2019 1:35 am
cassowary wrote:
Thu Jul 04, 2019 9:17 pm
Another thing. We don't know what China's real GDP growth rate is. The official number is probably inflated.

China’s GDP growth could be half of reported number, says US economist at prominent Chinese university

I wonder if the professor still has a job in Peking University.
Professor Pettis may even be right and the PRC statistics might even be cooked. So while we cannot prove it unequivocally we can get an indication of the health of the PRC economy by checking up on its imports. Imports are harder to lie about because you can always double check them against the equivalent export statistics from the supplier countries:

1. Iron ore

China iron ore imports fall to 18-month low in April as Brazil shipments slide. ... For the first four months of 2019, China imported 340.21 million tonnes of iron ore, customs data showed, down 3.7 percent from 353.32 million tonnes in the same period last year.May 7, 2019

https://www.reuters.com/...china...iron ... onth-low-i...

No one buys iron ore unless they plan to smelt ferrous metals. The shortfall of imports (bearing in mind that the shortfall of exports from Brazil have been made up by increased imports from Australia (where else?) it indicates a slight reduction in iron and steel production: likely in response to reduced demand. Of course trump's 25% tariff increase on steel imported from the PRC might be largely to blame for that.

By the way; iron ore prices are currently strong.

Oil

2. Oil, is arguably a more sensitive indicator to the health or otherwise of their national economy as it applies to transport as well as industry.

https://oilprice.com/Latest-Energy-News ... iners.html
China Grants More Crude Oil Import Quotas To Refiners
This indicates steadily rising demand and follows on from the trend of recent years:

https://www.ceicdata.com/en/indicator/c ... il-imports
China’s Crude Oil: Imports was reported at 9,261.414 Barrel/Day th in Dec 2018. This records an increase from the previous number of 8,425.684 Barrel/Day rh for Dec 2017.
copper

Another key indicator of industrial activity.

https://www.bloomberg.com/news/articles ... rts-demand
China Copper Imports Drop as Weak Economic Outlook Hurts Demand
As the article explains part of the reason for the fall in in imports has been a considerable increase in China's own copper smelting capacity. But has this been matched by a similar expansion of copper mining within China?

https://tradingeconomics.com/china/impo ... oncentrate

Imports of ores and concentrates are up.

Summary. Trumps tariffs seem to have had only a marginal impact on the health of the PRC economy. The overall recent trend of its imports of key industrial materials indicates (agreed) a slowdown compared to previous years but the PRC still enjoys robust growth.

Which supports my impression that in the Trump-China tariff raising race to the bottom the USA may well win by falling into recession first.
I don’t know how to derive gdp growth from iron ore, oil and copper. However this article says many experts are doubtful that the official figures are correct:

https://www.google.com.sg/amp/s/amp.cnn ... index.html
The Imp :D

neverfail
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Re: measuring economic health via imports of raw materials.

Post by neverfail » Fri Jul 05, 2019 4:07 am

cassowary wrote:
Fri Jul 05, 2019 2:32 am

I don’t know how to derive gdp growth from iron ore, oil and copper. However this article says many experts are doubtful that the official figures are correct:

https://www.google.com.sg/amp/s/amp.cnn ... index.html
The official figures may or may not be be doubtful cassowary - the situation is I agree very murky. But though "experts" might get it wrong the import volumes speak for themselves.

I became suspicious of the allegation that the PRC economy was in trouble because, out here, the unprecedented volume of iron ore being shipped from this country to the PRC has been prominent in the news. That and the global spike in iron ore prices resulting from that demand (bearing in mind that the PRC is the World's biggest importer of iron ore).

Now cass, were the PRC economy sinking into recession I would expect by now to be witnessing cancelled orders for imported fossil fuels and raw materials - along with a price slump for both. The fact that the opposite seems to be happening indicates that despite the allegations to the contrary the PRC economy is still in a state of robust health.

https://www.marketindex.com.au/iron-ore

Cass, I know that your loathing for the regime in China is visceral; but please do not let this emotion lead you into wishing ill on the country and its people.

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cassowary
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Re: measuring economic health via imports of raw materials.

Post by cassowary » Fri Jul 05, 2019 3:47 pm

neverfail wrote:
Fri Jul 05, 2019 4:07 am
cassowary wrote:
Fri Jul 05, 2019 2:32 am

I don’t know how to derive gdp growth from iron ore, oil and copper. However this article says many experts are doubtful that the official figures are correct:

https://www.google.com.sg/amp/s/amp.cnn ... index.html
The official figures may or may not be be doubtful cassowary - the situation is I agree very murky. But though "experts" might get it wrong the import volumes speak for themselves.

I became suspicious of the allegation that the PRC economy was in trouble because, out here, the unprecedented volume of iron ore being shipped from this country to the PRC has been prominent in the news. That and the global spike in iron ore prices resulting from that demand (bearing in mind that the PRC is the World's biggest importer of iron ore).

Now cass, were the PRC economy sinking into recession I would expect by now to be witnessing cancelled orders for imported fossil fuels and raw materials - along with a price slump for both. The fact that the opposite seems to be happening indicates that despite the allegations to the contrary the PRC economy is still in a state of robust health.

https://www.marketindex.com.au/iron-ore

Cass, I know that your loathing for the regime in China is visceral; but please do not let this emotion lead you into wishing ill on the country and its people.
I know you have a visceral hatred for the US. Don’t let that cloud your judgement.
The Imp :D

neverfail
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Re: measuring economic health via imports of raw materials.

Post by neverfail » Fri Jul 05, 2019 3:57 pm

cassowary wrote:
Fri Jul 05, 2019 3:47 pm
I know you have a visceral hatred for the US. Don’t let that cloud your judgement.
:lol: Tit-for-tat nonsense, imp!

Did the prophet Jeremiah hate Judea because he prophetized its downfall to the Assyrian host?

neverfail
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Re: "It's an ill wind....."

Post by neverfail » Fri Jul 05, 2019 5:29 pm

In any case I am impressed that US firms are moving their supply chains from China to Vietnam.

Vietnam seems a logical substitute. It is geographically close to China; politically stable (even if the regime is not entirely to our liking). Since Vietnamese civilization is based upon a synthesis of the same three philosophies, Confucianism, Taoism and Buddhism, that have underpinned Chinese civilization for centuries, presumably Vietnamese workers have the capacity to perform as well as their Chinese peers.

I would not begrudge this country any of the economic benefits it potentially is poised to reap from the shift.

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cassowary
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Re: "It's an ill wind....."

Post by cassowary » Fri Jul 05, 2019 7:33 pm

One possibility for the Chinese imports of strategic minerals is that they are preparing for war. After all, that’s what Xi told its military to do.

https://www.scmp.com/news/china/politic ... order-2019

In a conflict with the US and its allies, the US will choke China off from its supplies of iron , oil etc like what the Royal Navy did during WWI. So Xi is stockpiling.
The Imp :D

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