Is it Really Bad or Getting better? Or Both?
May 13 UPDATE: Here are the new China export numbers for April and a bit of analysis from multiple sources on what they mean. Summary: Over all it's disappointing, domestic demand is not really here (in China), Govt stimulus is not spurring investment by Chinese companies in China (so where is all the money going? The stock market. Watch out for a huge drop in the near future.).----------------------------------------First, a culture note. If you think that the days of face being a major consideration in business in China are past, or that "it's all business now," or that "business is business no matter where you go," then do I have a link for you! Apologize Inc. (Chinese) If you can't say sorry, they'll do it for you! Did you piss off your boss? Give them a call. Did you get in a fight with your wife? Here's your ticket out of the dog house. Did you make a spectacle of yourself at the company dinner the other night? These guys are your path back into good social graces!Not only is face still a very big deal in Chinese business, these guys are turning it into money! Conflict resolution with a Chinese twist. It's all about knowing your market.Now, a “It really is this bad” link. Loan money wasted, no domestic or international growth to speak of, over supply, over capacity, inflation fears, no growth in power consumption (production) and only government stimulated (as opposed to sustainable) spending.Or you could read this one, approved by the Chinese government. Summary: China-government sponsored think tank release info that economy is up. Xinhua reports companies listed on the Shenzhen and Shanghai exchange showed both gains in the stock market and net earning profits (although still down more than 25% from last year). No link between on-paper profits or the growth in the market and the billions in loans given out by the government in the first quarter though.But Jack himself over at the Managing the Dragon blog seems to think that it's not only not that bad right now but getting much much better. (I recommend Jack's blog and book--very insightful stuff. Book review coming soon!) I won't argue with Jack about his opinions or the numbers. But I will really question the context and the hope that numbers give when people don't have the whole story (and I don't have the whole story--so I'd really like more, please Jack). Here' my three contextual issues.First, PMI numbers are up. Context: What factory in China has bought any new raw materials in the last 12 months? No one. They've all been living with and have finally used up last years (unpaid for) inventory. Retailers in in the West have similarly been using every last bit of inventory before they are absolutely forced to place new (MOQ) orders. AND (yes, big and) it's the start of the holiday season in the West. Back to school, Halloween, the Holidays--these are the biggest retail times in the West every year. OF COURSE orders are up now...but is it a trend?! Is this a hopeful sign or just an MOQ refill in a prolonged recession? I hope that we're going to being coming out sooner or later, but I think that we need to see if orders are continuing an upward trend through August (two Q's of positive growth) to have a lot of hope.Second, housing starts are up. Context: The industry is being massively incentivised, raw materials are dirt cheap, Western China (especially Sichuan) was already scheduled to get a ton of infrastructure money, prices to consumers are low (no demand for the last year) and through Q1 credit has been easier to get than dumplings in China. Is this a positive trend or will it slow down now that loans are going to be limited for the rest of the year, prices rise and once Sichuan is more rebuilt?Third, record auto purchases. Context: Chinese New Year, great incentives on cars, massive over production in the domestic market last year, easy credit and face in bad economic times have all played a big part in the surging auto sales.I'm not trying to be an antagonist, just questioning the context of the "recovery" numbers. I hope that I'm wrong and that it gets better soon. Personally, it's in my best interest for China to recover sooner than later. I'm just not sure that the situation is all that hopeful yet.I know that the stock market is up--but is it stable? I know that are more signs each day that things are changing--but is it sustainable? I'm excited for this if it's for real. And I'm not disagreeing that there is hope as much as I'm trying to be cautiously optimistic (emphasis on cautiously).And in a completely unrelated note. This is my favorite email from a factory so far; I just thought this was too interesting not to pass on. Like, I've said before, it's a great time to be buying just about anything in China!!
Dear Sir / MadamWe are please to offer you directly from the Manufacturer, Buses at World Recession Prices!10M 43+1+1 Diesel Bus from USD 33,900.006M 17+1+1 Diesel Bus from USD 9,600.007M 20+1+1+1 Diesel Bus from USD 16,470.008M 20+1+1+1+1 Diesel Bus from USD 21,540.00Both available in Right hand drive and left hand drive. Contact us for full details. Distributorship offer is still available for some countries. We reserve the right not to supply to countries where we have our own distributor already.Thank you.