9.1% is the number- that’s GDP growth in China in Q3. It’s the lowest in 2 years, but that certainly doesn’t seem too bad to me in light of all that’s going on around the globe. Chinese exports were hurt by the slow down in Europe, but retail sales within China grew about 17%- that’s impressive.
One would think the markets would respond positively to this news- not so. Many news services are reporting 9.1% was a disappointing number. However, that’s not why those markets were down. With inflation being the primary enemy of the Chinese economy, a little cooling off of GDP is not the worst thing in the world.
It was news out of Germany that dampened the world’s appetite for risk and equities. German Chancellor Angela Merkel’s chief spokesman said EU leaders won’t provide a quick ending to the debt crisis at an Oct 23 summit. Last week, the market had been optimistic the EU would begin to deal with this problem. The Germans killed the optimism, and down stocks went. It seems all global equities markets are being held hostage to the EU banking crisis.
The Shanghai A shares sold off rather harshly overnight- down 2.35%- the B shares identical at 2.35%- leaving China markets still very deeply in Bear Market territory- down about 20% on the year.
There has been rumors abounding suggesting the Chinese are ready to step in a help with an EU bailout. The rumors say they are just waiting for the enormity of the problem to be defined. This was reported in the UK’s Sunday Times.
It’s a sleepy Monday morning on what is traditionally a very slow week in the markets. The news is dominated by Hurricane Irene, and the images out of Vermont are heartbreaking. The rest of the Eastern Seaboard seems to have handled it very well.
In Monday trading, the China markets sold off a bit. The Shanghai A shares gave back 1.36%, and the B shares 1.15%. The A shares seem to be trapped in a range between 2640 and 2740 for now.
The Wall Street Journal carried an article written by Yukon Huang of the Carnegie Endowment. He suggests China economic numbers are badly skewed by two major factors- the amount of low end household spending that occurs in the “underground” economy in order to avoid taxes, and the government expenditures which, in China, act almost like household expenses. He believes middle class consumption is grossly understated in China.
Bank of America economists Lu Ting forecasts China will be tightening bank reserve ratios once again in September. Short term- probably a negative for the markets, but longer term there’s nothing more important than bringing inflation under control.
China industrial profits rose 28.3% in the first 7 months of 2011 according to the National Bureau of statistics.
The Financial Times reports solid profits from China’s oil industry paves the way for further off shore investment.
Sorry for the late post today. I was up too late last night to get an early start on the day. Here’s the news out of China.
In overnight trading, the major China indexes dropped a bit after Wall Street’s huge run up. The Shanghai A shares were off .51%- the Bs off .38% in lackluster trading.
BIDU was up about $10 in trading yesterday. Subscribers were able to sell calls against their position for the 3rd time after two profitable trades in the last two weeks. Subscribe if you want to learn about this.
Yesterday’s 300 point rally on Wall Street was fueled by perceptions there could be a “QE3″ coming out of the economic meeting in Jackson Hole this week. However, China also played a big part in fueling the rally. A manufacturing report out of China showed moderate slowing, but still enough manufacturing to maintain GDP growth in the 8% to 9% range.
Commodities were all higher on the news- oil and copper leading the way.
Yesterday it was widely reported China has now surpassed the US as the largest consumer of PCs in the world. 18.5 million PCs were sold in China in Q2 vs 17.7 million shipped to the US. China is expected to consume 85.1 million units next year compared to 76.6 million for the US.
Harvard Economist Martin Feldstein believes the Chinese will allow the RMB to rise more rapidly over the next 12 months than it has in the past 12. Feldstein believes this will mitigate the risks in China’s foreign investments, and reduce the costs of imports, thereby reducing inflation.
One final note- VP Joe Biden, who has been on a trip to China to reassure the Chinese our bonds are good, not surprisingly goofed up the numbers on our treasuries. In a speech, he claimed we had good reason to watch out for our bonds as the US owns 85% of them- this is simply wrong. We only own 69%. China holds 8%- he got that right. Way to go Joe.