a weekly chronicle of the Chinese economy
Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based arereasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.
Chinese exceptionalism. That phrase, and its variants, arethrown around in any number for fora, occasionally correctly.
himself is not averse to describing certainaspects of China’s historical journey as
. The recentcapital withdrawal from emerging Asia, dating to the initial QEtapering tremors back in Q2, may be yet another example ofthe Chinese experience developing along a unique trajectorydespite a common external shock being visited upon the region.Between April 1 and yesterday, spot USD/CNY has moved inthe CNY’s favour, whereas the average emerging East Asianexchange rate has depreciated sharply. The average BRICdepreciation, excluding China, has been 12%. On the surface,the performance of the CNY has been remarkable. Or is it?Those caught up in the sentiment of the sharp move in the NDFcurve through June, when substantially CNY depreciation overthe coming year was priced in, with global investors agog atthe difficulties being faced by the interbank funding market, willpresumably see it as so. But wait ...
noted thatthrough July those same investors seemed extremely reluctantto give up on their NDF positions despite SHIBOR receding tonormal levels early in the month. The grudging acceptance thata financial catastrophe was not imminent has slowly filteredthrough to more realistic NDF pricing; and spot performancehas done nothing to contradict that move. This is a timelyreminder that currencies backed by large external surpluses(the flow) and considerable net international asset positions (thestock) tend to appreciate in the midst of market squalls. Thosecharacteristics are scarce. And if home monetary policy is beingtightened as well? Forget about it.
Turning to other matters,
draws upon a widerange of data sources to piece together the complex mosaicof the Chinese economy. Outside of the regulation indicators,China’s logistics sector is an invaluable mirror on the pulse ofboth domestic and external demand. Premier Li’s predilectionfor such proxies was made known some time ago, with railfreight joining electricity output and bank loans in his favouredtroika.
is with the Premier in spirit on this issue.However, rail cargoes alone are not as analytically useful astotal terrestrial freight, especially when one considers that9 tonnes out of every 10 moved on land goes by road. Totalterrestrial freight was 9.9% above year ago levels in July, a slightadvance on the pace seen across the first half of the year. Thatis a little faster than the rate of nominal GDP growth reported inthe first half; but quite consistent with the official data for July.
The pace set by terrestrial freight is presently being outdone byaquatic throughput, which accelerated to 18.8%yr in July, a heftyincrease from the first half average of 7.1%. A material portionof that gain is due to the flattering comparison with July 2012- a point
has belaboured in his recently analysiesof the monthly data flow. Air freight volumes though are laggingwell behind both land and water logistics, being up just 2.7%yr.That rate is broadly representative of the recent experience ofother exporters of sophisticated manufactures across emergingAsia. Weaker relative outcomes for air freight also jibes wellwith the observed strength in raw materials imports of latevis-a-vis the subdued state of the inward leg of the processingand assembly trade. Weak absolute outcomes for air freight areindicative of sluggish global consumer durables demand andmeek ICT hardware trade, although recent survey data in theadvanced world implies some modest upside in the short term.
28 August 2013
Westpac Institutional Banking Group – Economic Research – firstname.lastname@example.org – www.westpac.com.au
Logistics proxies: volume
-20-10010203040-20-10010203040 Jan-01Jan-03Jan-05Jan-07Jan-09Jan-11Jan-13Aquatic freight Terrestrial freight%yr%yr
Sources: CEIC, Westpac
Stats of the week: China is home to 394 mammalspecies, 75 of whom are classed as endangered.
Selected currencies against the USD
Source: Bloomberg, Westpac.
% change between April 1 and Aug 27, 2013
Emerging Asia (ex HK, China and India) average
Overnight SHIBOR & the 12mth CNY NDF
024681012140.51.01.52.02.53.0Sep-12Nov-12Jan-13Mar-13May-13Jul-13Sep-13%pa%chgCNY NDF 12mth (lhs)Overnight SHIBOR (rhs)
Sources: WestpacEconomics, CEIC.
Foreign investorsreluctant to let go,despite SHIBORsettling down.
Air freight volumes: China and the NIEs
Sources: CEIC, Westpac.Data smoothed and LNY attached.