Chinese pride comes as exports crash by 16% in 2009
Posted on 12 January 2010 with no comments from readers
China enjoyed its moment of hubris this week with reports that 2009 exports mean Germany has lost its crown as the world’s biggest exporter, by value if not yet quality, while the Chinese economy is now destined to overtake Japan at global No2 this year.
Sitting in Dubai where the opening of the world’s tallest building last week is a reminder of where such exponential growth can land you a year later – and in 2009 Dubai had the worst performing property market in the world after a huge crash – it is easy to conclude that the Chinese boom is heading for a spectacular bust.
Emerging market cycles
Emerging market business cycles are notoriously volatile. The US in the 19th century was the classic example, with massive booms and busts. In China we are asked to believe that this time it will be different. It never is, ask Dubai.
Success is only relative in the case of China in 2009. Yes exports inched ahead of Germany. But the total value of all exports from China in 2009 was actually down a thumping great 16 per cent to $1.2 trillion, not exactly a boom, most definitely a bust and a tragedy for an export-led emerging economy.
It was just that Germany’s exports performed even more miserably in the worst year in global history for trade – actually far worse than 1930. German exports crashed by 20 per cent in 2009.
If we look at the December export figure for China – now trumpeted for an 18 per cent gain – we can note that this is actually only the first positive monthly gain in 14 months, and that the comparative month in 2008 was the worst of the recent slump in global trade.
On the other hand, China certainly managed to stoke up its domestic economy to compensate with a stimulus package equivalent to half of GDP in the first half of 2009. But how sustainable is this absolutely massive hike in public spending?
Car sales rocket
Chinese with access to credit went out and bought a car. Vehicle sales shot up by 46 per cent in 2009 to 13.6 million units, overtaking the US where sales crashed 21 per cent to 10.4 million vehicles. Again how sustainable is this bubble in sales?
Pride usually comes before a fall. Dubai had its moment of hubris before the nemesis of 2009. China looks to be next up. The stock market and housing look highly vulnerable.
The king of shorts is already booking his positions for the stock market reversal of the decade, and this looks a winning hand for 2010 (see this article).
