In yesterday's West Australian newspaper it was reported;
'China's trade surplus may slide 19% next year as imports surge because of growing domestic demand, Bank of America-Merrill-Lynch said.
The amount will narrow to $US160B from an estimated $US198B this year, Merrill's Hong Kong-based econmist Lu Ting said.
A smaller surplus may reduce friction between China, which is poised to become the World's biggest exporter, and its major trading partners, China's Commerce Ministry said this week....
Next year, imports may climb 16%, outpacing a 9% gain in exports, he said, forecasting an economic expansion of 10.1%'
My comments;
Initally I thought this was an indication we were indeed seeing the early signs of China becoming much less, perhaps even totally non-dependant on the US consumer for its growth, OR is this an addition to the foundational work that's already been implemented by China over the past 12-15 months?
The US has become a basket case in my view given that their domestic savings rate as a percentage of disposable income is -2.9% as of 2008! The US must therefore continue importing surplus savings (largely from China to date) in order for their economy to grow. $US3.5B of foreign capital is required EACH BUSINESS DAY to fund its external shortfall.
With the US economy & EU for that matter, in tatters China needs to increase its domestic consumption in order to offset the siginificant fall in exports to the US (consumer). It appears that China is well on the way to achieving this, albeit highly likely that much of this growth in domestic growth is attributed to 'state' stimulus injection at this time?
In my view the China-US relationship is fragile at best although is appears that US Congress is hell-bent on further weakening this relationship by introducing 'Anti-China' legislation AND in the process continuing with the blamegame. That is, blaming China for their ever increasing trade deficit & federal debt. Instead the US desperately needs to take ownership of their poor level of domestic savings which is the real issue.
China has over the past 12-15 months (perhaps longer) been accumulating all manner of natural resources & resource companies, we have seen many examples of this here in Australia. The Chinese as we also now know, have been significantly increasing their holdings of gold which is interesting because China from a deomestic perspective has some significant 'in-ground' gold reserves that theoretically at this point may never find their way once mined, onto the world gold market? The size and scope of China's ACTUAL gold/precious metal holdings is very much an unknown. I'd have to say it's signifcantly greater that what we're led to believe, much greater!
The way I see it is that the US have been the 'masters' of smoke & mirrors since the beginning of time effectively so China is now beating the US at their own game are they not?
China or should I say Asia could effectively do without the US altogether given the fullness of time? The relationship between China & Japan albeit not the friendliest in the past could well become an extremely 'complimentary' relationship as I'll explain below.
Japan is a labour short island that has the ability to provide technolgical assistance to China in terms of pollution abatement as well as energy conservation. China has a labour surplus with a new focus on quality growth rather than quantity & can assist Japan with alleviating its competitive pressures due to it's rapidly aging population & its high cost economy.
China could very well be poised to pull the rug out from under the US completely? China must surely now be questioning the size of their holdings in US Treasuries & other US dollar assets given the state of the US economy? China have been going about 'setting up' an alternative growth strategy to the one that has been relied upon so heavily in the past - the US consumer.
From a domestic perspective China is blessed with many of the world's significant reserves of natural resources, it is afterall a very large & diverse nation. The natural resources they don't have plentiful supplies of namely uranium, copper, bauxite, oil ete are being secured by way of increasing their holdings in international companies either exploring for or producing these commodities. Then there's the commodities that China already have a strangelhold/monoploy of, in particular rare earths which are absolutely critical in terms of a changing world environmentally & of course gold I believe.
In closing, these are simply my thoughts & I welcome those of others here on HC as I believe a great many on HC are indeed profoundly intelligent people challenging what others (sheeple) in our society take as gospel?
In closing I believe it's a very real possibility that China may indeed trigger a further global economical crisis by way of the US in order to assert it's developing global power & take over from the US who will rapidly become a third world country.
We here in Australia, me included, have looked upon China as a being a driving force for our resources sector however I do believe that a higher level of caution now needs to be exercised.
We are in my view in for a VERY interesting 2010 and we thought 2009 was eventful ;)
