39% surge in oil imports puts China in first trade deficit for seven years
Posted on 10 April 2011 with 1 comment from readers
The world’s second largest economy has posted a $1 billion trade deficit for the first quarter of 2011, China’s first trade deficit in seven years.
Soaring raw material costs are to blame with oil imports, mainly from the Middle East, surging 39 per cent in value to $43.7 billion. Iron ore imports cost 83 per cent more at $27.7 billion. Total imports surged 33 per cent to over $400 billion, $1 billion above exports.
Trade surplus halved
Experts think the annual trade surplus will be below $150 billion this year compared with $295 billion 2008. This halving of the Chinese trade surplus since the global financial crisis is seemingly at odds with double-digit GDP growth claims.
However, more worryingly soaring commodity, real estate and labour costs are symptomatic of an overheating economy. Hedge fund manager Jim Chanos describes this as ‘Dubai x1000′ and has been shorting China for over a year.
Other recent data showed that passenger-auto sales grew at a pace well below industry forecasts in March, also signaling a slowdown in the economy of the Middle Kingdom.
Pole position
Last year Chinese auto sales overtook the US for the first time with a record 18.1 million sold. But sales incentives have ended and petrol prices are surging, alongside the cost of oil imports.
The pace of auto sale expansion decelerated from 63 per cent growth last March to just 6.5 per cent this year. General Motors sold 233.014 vehicles in China in March, hardly changed on 230,048 in the same month a year ago.
This month China hiked interest rates for the fourth time in six months to combat rampant inflation, although this is clearly only partly due to domestic price rises and mainly due to imported inflation.
Printing dollars
The rise in imported inflation is widely blamed on loose monetary policy in the US which is flooding the world with dollars and driving up commodity prices.
However, thus far China appears set for a soft landing after years of high growth with just a slowdown this year. But Chanos predicts that such an emerging economy will not be able to slowdown without tripping up into a deep recession and property crash.
Higher and higher oil prices are the likely trigger for this adjustment.
1 Comment posted by readers:
Some fellow on the John Bachelor show on WBAP radio out of Dallas, Texas (Internet radio is cool) just said that the real rate of food inflation in China is between 10 & 15 % today, not the 5% they are claiming in official statistics.
I’m always amused when various commentators claim that China will soon rule the world. Using what for fuel? Their oil imports are rising rapidly. If they keep selling private autos at the rate they are now, they will find it difficult to export enough to avoid a negative trade balance, as the price of oil escalates. Just about everyone agrees that the dollar will continue to decline in value. That will make oil go up and up. I doubt the oil exporters will give China a discount, but I am often wrong. We shall see. Maybe they are a lot more lovable than the rest of us.
I just read portions of the book by Robert L. Hirsch (of Hirsch Report fame) Roger H. Bezdek, and Robert M. Wendling, entitled ‘The Impending World Energy Mess’. On page 167, the authors claim that by using electric ground heating of oil shale in Western Colorado, it may be possible to produce in excess of a MILLION barrels of oil PER ACRE. I wonder if China has 2 TRILLION barrels of shale oil beneath their land? Shell has been doing a lot of work on the process. I read yesterday that Isreel has the second largest known deposits of oil saturated shale. I find that hard to believe, but some VERY wealthy individuals are investing in a program to research developing it. Of course, you need to produce the electricity to heat the ground. But there are a LOT of ways to generate electricity. In the Western USA solar and wind come to mind. I wonder if continuous heating is needed. I would think not, because the ground wouldn’t cool rapidly if the power was interrupted. If this is true, you could use wind & solar to heat an area only when electricity was available. Although a dedicated electric grid might be needed. That would be expensive, but not as bad as running out of liquid fuels.
First I need to survive the next cold front which is spreading tornadoes from the Great Lakes down to the Gulf Coast. This dangerous weather is getting to be a weekly thing. Global warming, excuse me, ‘climate change’, no doubt. At least the cold front will get rid of some of this HUMID early spring heat for a few days. The auto body shops must love all this hail. Now it is time to learn about the ‘pole shift’ that will destroy our magnetic shield from all the dangerous rays from space on the ‘Coast to Coast A.M.’ radio show. That should be good for a few laughs.
Someone just said that the new Egyptian regime is not happy about the plans by Ethiopia to dam up the Nile River. Man, that whole region could blow up in a couple of years. It reminds me of Europe during the first half of the last century. Not a peaceful place.