More On China's Plunging Exports

Posted last night: Oh China - Where Are Your Exports? and updated this morning More On China's Record Shrinking Exports

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This is from the local press: China May exports plunge but investment surges

• BEIJING: China's investment surged in May as the government poured money into its economic stimulus, helping to offset an unexpectedly sharp drop in trade, and economists said the world's third-largest economy was improving.

Hmm... focusing on the 'surging investment' caused by the government stimulus?

• Spending on factories and other fixed assets soared 32.9 per cent in the first five months of the year, the National Bureau of Statistics said. Merrill Lynch said that translated into growth in May of up to 38 per cent.
  
  "Domestic activity has picked up, thanks to the government stimulus spending," said economist David Cohen of Action Economics in Singapore.
  
  May exports fell by a record 26.4 per cent from the same month of 2008, while imports contracted by 25.2 per cent, the customs agency said yesterday. That exceeded most economists' forecasts.
  
  Exports will not recover until key US and European markets rebound, said economist Zuo Xiaolei of Galaxy Securities in Beijing. She said weak global demand for China's goods will hurt its appetite for imports, a big share of which are raw materials and components used by export industries.
  
  "For a fundamental improvement, we have to look to the international market," Zuo said.
  
  Despite the fall in imports, analysts said China's demand for oil, iron ore and other foreign raw materials is rising as Beijing pumps money into the economy through its 4 trillion yuan, or US$586 billion (US$1 = RM3.51) stimulus.
  
  "The Chinese economy for sure is improving. We have seen the bottom of the cycle," said Credit Suisse economist Dong Tao.
  
  Other indicators also show the economy is recovering.
  
  Home sales surged 45.3 per cent in the first five months of the year from the same period of 2008 to 1.1 trillion yuan, or US$161 billion, the government said on Wednesday. Auto sales are up sharply, driven by cuts in sales taxes and other government incentives.
  
  The contraction in imports was driven in part by a 30 to 50 per cent fall in prices of iron ore, oil and other commodities from last year's highs, economists said.
  
  They said that meant the value of imports fell even as volume rose.
  
  "The full economic impact of China's stimulus-driven infrastructure expansion will likely become more apparent in the second half of 2009," Jing Ulrich, JPMorgan's chairwoman of China equities, said in a report. "Policymakers must take steps to ensure that consumption remains on a firm growth trajectory." - AP

Andy Xie would argue against the home sales 'improvement'. :D

Massive Market Warning From Andy Xie Again

• The return of funds flowing into property is even more ridiculous. A property burst usually lasts for more than three years. The current burst is larger than usual. The property market is likely to remain in bear territory for much longer. The bulls are talking about inflation as the bullish factor for property. Unfortunately, property prices have risen already and need to come down even as CPI rises. Then the two can reach parity.
  
  .... China's property market holds even less value in the long run. Chinese properties are sitting on land leased for 70 years for residential properties and 50 years for commercial properties. Their residual values are zero at the end. The hope for perpetual appreciation is a joke. If you accept zero value at the end of 70 years, the property value should only be the use value during those 70 years. The use value is fully reflected in rental yield. The current rental yield is half the mortgage interest rate. How could properties not be overvalued? The bulls want buyers to ignore rental yield and focus on appreciation. But appreciation in the long run isn't possible. Depreciation is, as the end value is zero.