Back to the old growth model

The latest Chinese trade data strongly suggests China is turning away from economic reform, going back to its investment-led growth model. Money leaks out at an increasing rate

9th Jun 16, 8:55am by David Chaston

China's May trade data has implications for New Zealand.

Their export growth in yuan-denominated terms slowed to +1.2% year on year in May from +4.1% in April, China customs data showed late Wednesday.

Imports grew +5.1%, significantly rebounding from a -5.7% decline in April, according to these figures.

Their trade surplus last month was just a tad under +US$50 bln which was up from April's +US$45.6 bln, but below market expectations of +US$55.7 bln.

Foreign trade increased +2.8% on a year-to-date basis for the first five months of 2016.

Rather than signaling improved consumer demand, this result is likely to reflect a return to the old Chinese growth model.

This data indicates Chinese policymakers have given up trying to restructure their economy and have chosen instead to double-down on 'investment' projects. Among the winners of this shift will be Australia and their minerals exports.

And dollar-denominated imports from Hong Kong surged by a record +242.6% year on year in May, suggesting no let-up in the ploy of over-invoicing to move cash out of China. No doubt some of these escaping laundered funds will end up in our property markets.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

7 Comments

by James007 | 9th Jun 16, 9:48am 1465422514

Can you believe the data though?

by two otherguys | 9th Jun 16, 10:03am 1465423384

No doubt at all

Cash deluge out of China into Hong Kong
"No let-up in the ploy of over-invoicing to move cash out of China. No doubt some of these escaping laundered funds will end up in our property market"

We're off and racing - have a close look at March sale of house at 6 Hepper St New Lynn for $1,098,000

A tired old weatherboard 1960's group home - tired everything - original cost about $6000 - house and land - nothing done to it - probably a rental - not much you could do to it other than bulldoze it and rebuild - that won't happen - the neighbouring houses don't encourage it

That someone was prepared to pay $1,098,000 for that is frightening

by PeterPen | 9th Jun 16, 9:55am 1465422958

"No doubt some of these escaping laundered funds will end up in our property markets." Plus a lot of the money Draghi is printing these days which will go into stock buy-backs that assure obscene executive pay that wants to be spent. Should we get a Caravaggio or a mansion in Auckland this year, darling?

The middle class with its little nest eggs and beliefs in the virtue of hard work will end up gutted. I do not envy our children for the political instability and social strife they will probably have to live in.

All the NZ government needs to do is amend a few laws to reign in low-skilled bogus student immigration and excessive investment into residential real estate by non-citizens. Yet, the government no longer sees itself as the guardian of national interest, but as the lobby for the international monied classes. This cannot and will not work.

by Ralph | 9th Jun 16, 11:11am 1465427475

"Should we get a Caravaggio or a mansion in Auckland this year, darling?"

Clearly the Caravaggio dear, if we have to make a run for it how would we carry the mansion?

by rp | 9th Jun 16, 11:41am 1465429313

I feel China is ripping NZ off with this ploy. Print money, peg their exchange rate to the US, let the printed money leak out of their country, and whammo they end out with NZ assets for free.

While existing asset holders here benefit with higher prices, it is inflationary for everyone else and very corrosive to the long term health of our society and economy.

We should ban foreign buyers of property. As a country we're being asset stripped.

by DFTBA | 9th Jun 16, 12:48pm 1465433301

"This data indicates Chinese policymakers have given up trying to restructure their economy and have chosen instead to double-down on 'investment' projects. Among the winners of this shift will be Australia and their minerals exports."
.
Does this mean a strengthening AUS economy? If so, we'll see migration starting to flow out to Australia again. Give it 2 years....

by MikeM | 9th Jun 16, 5:32pm 1465450359

China is following Japan's default to constant fiscal stimulus and leaning on exports for growth. The government will eventually end up highly indebted to their own high-saving citizens.