This chart shows the amount we import from China (in dollars) divided by the amount of goods we import from the world overall.
I have included an exponential trend line in blue to show China's exponentially increasing market share. Why exponential? It fit the data best. There was a much higher correlation using an exponential trend line than there was using a linear trend line.
We know for a fact that this exponential trend line must fail at some point. There's no way that we could ever import more from China than the world overall, since China is part of the world. 100% is therefore the absolute maximum.
Note that the 12 month moving average in red is no longer keeping up with the long-term exponential trend.
I would argue that at least part of China's "miracle" growth story is built upon that exponentially rising trend line. In other words, investors may think that China can continue to exponentially increase their market share vs. the world overall indefinitely.
Not going to happen.
Source Data:
St. Louis Fed: U.S. Imports from China, Mainland, Customs Basis
St. Louis Fed: Imports of Goods: Balance of Payments Basis
Interesting chart for a lot of reasons: seasonality, sensitivity to recessions, the current fall off.
ReplyDeleteNow, why would our recessions affect imports from China more than those from the rest of the world? Just as a guess, perhaps a lot of what we buy from China is stuff we don't really need.
China's growth is unsustainable, regardless of what you're showing here - though that is an important part. How well can they do when our economy falters?
China looks bubblicious to me. What happens when they hit the skids? I think it's going to be big-time ugly. For everyone.
Cheers (or somethin')
JzB
Jazzbumpa,
ReplyDeleteSome of the recent drop off is due to the price of oil.
Oil producers have more pricing power than Chinese factories.
Not going to happen.
ReplyDeleteStag,
True, but the asset strippers and credit creators can squeeze still more out of the exponentially growing imbalance before it ends imo. Especially with a Government sector that is willing to run enormous deficits to bailout and legitimize trillions in financial fraud.
No way would deflation or market based interest rates be as bad for the majority as the current system.
This is a system by and for thieves.
mab,
ReplyDeleteKeep in mind this particular imbalance is between China and the rest of the world.
I would argue that OPEC's pricing power is currently beating Chinese factory pricing power. This makes it more difficult for China to continue to exponentially grow its market share of our exported dollars.
Sorry China. The asset strippers and credit creators don't seem to have much of a preference where are exported dollars go, as long as they go somewhere that isn't here. Sigh.
I would argue that OPEC's pricing power is currently beating Chinese factory pricing power. This makes it more difficult for China to continue to exponentially grow its market share of our exported dollars.
ReplyDeleteStag,
That's currently the case but I don't think it will continue to be. I still think commodities are in a big bubble. Bernanke is full of crap imo when he says commodity prices are rising (doubling!) due to emerging market demand. I think the rapid price rises are due to cheap credit and speculation.
China is in a bubble too, but when it pops Chinese labor will get cheaper. Of course, the Chinese Gov't could go crazy trying to stop the credit deflation I foresee and that would change things drastically.
Hu can say for sure?
mab,
ReplyDeleteHu could be right!
In any event, it would not surprise me to be having this same discussion about India vs. World at some point in the future.
We imported 14x more stuff from China than we did from India in 2009. We're not properly tapping our free lunches.
"China is in a bubble too, but when it pops Chinese labor will get cheaper."
ReplyDeleteI am not sure this is true. It might just stay the same as wages are sticky and there are minimum wages in China, BTW.
They have a demographic issue as well. I am seeing more older workers in factories when before they were all under 25.
I would like to see this sort of analysis done to Japan in the 60's and Taiwan in the 70's and 80's. I would guess they'd have somewhat similar lines...might not though. China's large size can create bigger effects.
Coba
“We must shift America from a needs to a desires culture. People must be trained to desire, to want new things, even before the old have been entirely consumed. Man’s desires must overshadow his needs.”
ReplyDeletePaul Mazer, a Wall Street banker 1933
Coba,
ReplyDelete"China's large size can create bigger effects."
It will be interesting to see if that works to their advantage. I'm of the belief that it won't.
Fatboy,
ReplyDeleteThat Paul Mazer was a visionary!
We must now shift America from a desires culture to a glutenous culture. People must be trained to overconsume, to want even more new things, even before the old have even been purchased. Man’s gluttony must overshadow his desires.
Or did we already pass that point? ;)
Mark - the real truth is that the "theoretical" Chinese exports are often really composed of exports from many other countries.
ReplyDeleteChina does a lot of assembly work, but when you sit down and figure out where the components in a lot of products came from, in many cases China's exports to us, which are all figured in that trade deficit, are composed of 50% or more goods sourced from other countries.
Stag,
ReplyDeletehttp://www.bloomberg.com/news/2011-01-24/bakken-crude-may-account-for-15-of-domestic-output-by-2015.html
http://www.cnbc.com/id/41495698/
Global oil demand is tepid. The Saudi's have cut oil output drastically in an attempt to keep the price per barrel high, but that doesn't explain the price increases in non-oil commodities. Moreover, as shown in the above links, supply in the U.S. (not to mention our colony Iraq) is expected to increase dramatically over the next few years.
Bernanke, Krugman and other financial meddlers claim that commodity price rises are due to demand. I don't "buy" it. Imo, cheap credit and speculation are the culprits.
When the Hunt Brothers pushed up the price of silver was that demand or easy credit/speculation?
MaxedOutMama,
ReplyDelete"Mark - the real truth is that the "theoretical" Chinese exports are often really composed of exports from many other countries."
As a side note:
We Don't Need No Stinkin' Jobs (in the U.S.)
mab,
ReplyDelete"Bernanke, Krugman and other financial meddlers claim that commodity price rises are due to demand."
1. Krugman claimed he wanted inflation and the Fed had a tool to create inflation.
2. The Fed used their tool. Commodity prices rose. Krugman got what he claimed to want. It worked.
3. Now Krugman claims that the tool doesn't create inflation.
4. If commodity prices crash due to excessive speculation, then he'll be right yet again.
Krugman can never be wrong. He's the conscience of a liberal God. Gods are never wrong. ;)