China Floods Market With Cash As Mixed Data Leaves 'COVID Rebound' In Doubt

March data painted

China's recovery is a mixed bag

There are doubts as to how much China's COVID-lockdown will boost global growth.

Exports grew year-on-year, which was a pleasant surprise.

The unexpected outcome was the sharp drop in outbound shipments by competitors South Korea and Taiwan. Macquarie economists, led by Larry Hu, said that the growth was driven primarily by clearing the backlog of order. The large trade surplus supports the argument for a GDP growth above consensus.

China is at the beginning of its recovery. It's like the early spring when the weather can be volatile.

Macquarie's economists published a report.

Consumer and producer prices were the more alarming sign.

The data showed a subdued demand at home. The first of three data sets released, the numbers led to speculation that the authorities could use more stimulus to support the growth.

The numbers on credit expansion were better than expected, despite the potentially ugly figures.

A spike in mid- and long term loans for households points to a revival of mortgage demand.

This brings us to our next point.

Bruce Wilds details below via Advancing Time blog

It is said that China keeps its market afloat with cash...

This rebound could drive commodity prices up, but the potential is overstated.

It could be argued, in short, that China enjoyed a similar growth bubble to that of Japan during the 1980s. This is over.

It may not be true that Chinese savers will pour out their cash in large numbers after the lockdown.

The majority of their spending will still be within China, and not enough to compensate for other factors. Many people forget that a large portion of Chinese household wealth has been invested in China's declining housing market. Losing money on housing investments is not likely to make those who are losing money feel the need to spend.

China's biggest financial problem is the collapse of its real estate market, which accounted for more than 25% of its GDP. Housing crash in China is just beginning to have a far-reaching effect. It could take many years for the full impact to be felt.

Housing has been the main source of wealth and savings for Chinese citizens. Prices are falling and the Chinese economy is feeling the full-blown wealth effect.

China's central banks pumped record amounts of cash into the banking sector in the middle of January as demand grew ahead of the Chinese new year holidays. Bloomberg reports that the People's Bank of China added a net of 1.97 trillion yuan (384 billion S$) through open market operations, a new record.

The Chinese Yuan (CNY), and the Renminbi Renminbi are interchangeable terms when referring to China's currency.

In 2022, the US-China trade in goods reached a new record. The two largest economies in the world remained deeply interconnected despite their attempts to separate. Imports from China will likely be under pressure as consumer spending and investment growth slows.

American companies also make efforts to find alternative suppliers, shorten the supply chain and bring jobs back home.

China has now fully implemented its One Belt One Road Initiative.

The world is trying to figure out if China deserves to be viewed as a positive force

.

Katharina Bookholz of Statista reports

Out of the 26 countries that were surveyed, 16 had a negative view of China. Since the poll began in 2019, the number of countries that view China negatively has increased.

More infographics can be found at

Statista

Nigeria, Kenya Thailand Russia Egypt and Saudi Arabia were the countries where most respondents favored China. However, the majority of advanced economies have a negative view of China. Around three-quarters (75%) of respondents from Japan, Sweden Australia, Denmark, United Kingdom and Germany have a negative opinion of China.

This is a sign that China has an issue.

In China, it seems that the opposite is happening. Unlike America, where the banking crisis and economic damage caused by a tightening of lending are only just beginning, in China the opposite appears to be occurring. The Communist Party has been easing its policies in an attempt to restart the economy. Loan demand is also surging.

Why the loan demand is so high?

The PBOC released a quarterly survey of bankers on Monday, which showed that loan demand had surged to the highest level for more than ten years.

The data on bank lending shows that long-term corporate debt is skyrocketing, despite the fact that the housing crisis has led to a reduction in household borrowing.

This could indicate a revival of confidence in the business sector as entrepreneurs invest or expand their factories. It is more likely that at least some of the demand for debt from corporations comes from companies who are borrowing money to refinance their existing debt.

Michael Every, Global Strategist for Rabobank and based in Singapore, appeared on Wealthion a few days ago. The video starts at around 28 minutes.

He takes the stand

What is happening now in China will not propel the global economy ahead.

This topic is linked to the question of why someone would dump dollars, and see the yaun competing with the dollar. I believe that China is past its prime, has been overrated in the West and has seen it's best days.