China’s Renewed Deflation Threat



“THIS IS RIDICULOUS. I WAS SITTING AROUND UNSOLD FOR MONTHS AND THEN WAS FORCED TO JOIN A SANTA FLEET-HIRE SCHEME. HOW HUMILIATING”

inflatable_christmas_products.jpg



Source of picture: www.diytrade.com

BEWARE the prophets of recovery in exports of Chinese manufactured goods during the current Christmas buying season.

Labour markets in the key export-processing provinces, such as Guangdong, are reported to be tight as production of everything from I-Pods to Barbie Dolls is ramped up.

It would be easy to misinterpret this as a recovery in Western demand, but how can this be when the real economic news remains bleak?

On a month-on-month basis there is bound to be an improvement because, of course, this is the Christmas buying season for the big retailers.

And any comparison with sales to the retailers in October-November is bound to look pretty stellar compared with the exceptionally bad same two months in 2008.

But will the retailers overstock only to find Western shoppers less-than-eager to empty the shelves? (Is this is a bigger-than-usual incentive to wait for the traditional January sales?).

And/or will too gung-ho manufactures in China be left with high inventories?

There have been plenty of extra incentives to import raw materials, including polymers and chemicals, to make finished goods in 2009 – from easy credit to increases in export-tax rebates.

This has contributed to the very high import volumes we’ve seen across a broad range of chemicals and polymers for the last 7-8 months.

China is in danger of only growing one export, therefore: Deflation.

, , , , ,

Leave a Reply