Hong Kong, Singapore trade suggests China in recession

Posted on 17 February 2009 with no comments from readers

Singapore Airlines is axing 17 aircraft from its fleet because of a 20 per cent plus collapse in air cargo shipments, while Hong Kong has reported a 27 per cent fall in air cargo in January.

Given that air cargo is a front-end indicator of global trade trends – because movements from place-to-place are so quick – and that both cities are acknowledged as ‘Gateways to China’, the only conclusion is that China itself must be in a deep economic downturn.

This is not what the official statisticians say, and not what’s promised for 2009. But then right up until the middle of 2008 Western economists were debating whether their economies were in recession, and it is now clear that the recession had already started.

Last into recession?

Chinese denials are therefore to be expected and perhaps explained by the fact that China has been the last of the major global economies to fall into recession.

Singapore Airlines boss Chew Choon Seng said in a statement yesterday: ‘We have to face the reality that 2009 is going to be a very difficult year’.

And to be fair, the Chinese Government might be worried about losing face but has not been slow in announcing a $585 billion stimulus package, proportionately far bigger than the Obama administration’s to date, and dispersing new loans rapidly across the economy.

Yet Bloomberg’s poll of 14 economists suggested that the Chinese economy will still expand by 6.3 per cent in the first quarter, albeit the weakest rate of growth since 1999.

Recession not growth

This is quite obviously wrong, just like the economists who said the West might escape a recession last year until it was staring them in the figures.

Yesterday foreign direct investment figures for January showed a 33 per cent fall to $7.6 billion for China, as the foreign manufacturers that have invested heavily into cheap Chinese factories are cutting back. Can the Chinese stimulus package offset this huge fall in investment?

It was only a year ago we were asked to believe that China could decouple from the Western World and drive the global economy out of recession. Now we are being asked to believe that the world’s greatest exporter can avoid a recession during a slump in global trade.

Economists should surely revise their figures now as misleading information about the global economic outlook will lead to bad policy measures. Let us face facts: The Chinese Emperor has no Clothes!
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