Export Numbers Out of China Collapse
Japan and the US Shutdown
The ongoing U.S. Government shutdown is bad news for Japan as the world’s third largest economy is trying to spur its own stagnating economy forward and at the same time reduce its debt.
We are entering a critical juncture or crossroads for Japan.
What Japan is doing is arguably very difficult in the easiest of times. With the U.S. Government shutdown, an impending showdown over the debt limit rapidly approaching, it is almost impossible. Prime Minister Shinzo Abe’s radical economic plan involves an aggressive monetary easing program coupled with fiscal stimulus and on top of that fiscal reform. This plan has a name and is called Abenomics.
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Options & Trading Guide & Binary Options Strategies : Binary Options Leader – This past weekend, new data out of China showed a collapse in Chinese exports. China has reported that May exports were up only 1 percent compared to the export numbers we saw in April. That number came in at 15 percent and 24 percent for the first two months of the year.
This is a steep fall off, and one could say an almost unprecedented plunge. However, this data actually says more about the black hole of which Chinese numbers emerge as well as the state of their economy.
In May, we reported that China had a problem with firms who were creating fake invoices in order to prop up trade numbers. This revelation had aroused suspicions that companies, in China, are using trade deals to evade capital controls. This was to bring more cash onshore creating a whole slew of problems like over inflated bubbles and inflation. This is something China keeps a tight lid on as it would not be good for the value of the Yuan in this export dependent nation.
There was very little market reaction after China released these new numbers. This could be indicative that traders are fully aware of the games China likes to play with economic numbers. We must commend the actions of China, and especially the State Administration of Foreign Exchange (SAFE), to crack down on these companies and for the People’s Republic of China to come clean in the end. This new level of transparency will help to clamp down on bad data and the hyper flow of capital into the country.
Still, these new numbers should open eyes. Exports were expected to rise 7.3 percent and they rose only 1 percent. Imports were supposed to rise 6 percent and they fell 0.3 percent. Still, these new numbers are supposedly the honest numbers now.
What could be the impact of these new numbers?
The Chinese economy could be growing much slower than initially thought. We could be seeing a growth rate closer to 5.5 percent, which is way lower than the State target of 7.8 percent. If China’s economy is not growing like we all think it is, then maybe they do not need all the aluminum and copper they should be importing from Australia, maybe, just maybe, China’s economy is not all it is cracked up to be.
An interesting side note, we had noted earlier today, that the World Bank had cut their growth expectations for China. The World bank had originally foretasted a year end growth of 8.4 percent. They slashed that number to 7.7 percent. Stay tuned, to Binary Options Leader as we will bring you the latest updates as we get them