By on March 10, 2009

When China reported January sales that were higher than in the US, detractors said: “Yeah, but China was down also.” To be exact, in January, China was down 14.35 percent, while the US had declined 37.1 percent.  Old China hands pointed out that the January sales numbers were exceptional, given the fact that there was a complete sales week missing in January, due to the early start of the Chinese New Year, where all of China is shut, closed, guan. Some of the same old China hands prognosticated that due to the same fact, February might be a roaring success. But who listens to old China hands? Okay, folks, listen up:

China vehicle sales surged 25 percent in February, the first gain in four months, Bloomberg reports. Sales of passenger cars, buses and trucks climbed to 827,600, the China Association of Automobile Manufacturers said today in Beijing.

And why would that be?

China has halved retail taxes on small cars and drawn up plans to give out vehicle subsidies in rural areas to revive demand. A $585 billion economic stimulus package is beginning to work.

Also, what the Chinese New Year had taken away in January, it gaveth back in February. Says Bloomberg: “The February sales jump, the biggest in 18 months, was also helped by an earlier Lunar New Year holiday. The weeklong break was in January this year compared with February last year. Snowstorms across much of China also disrupted the market in 2008.”

So it’s a fluke? A dead cat bounce? Not exactly.

March sales will likely be even better than in February, Xiong Chuanlin, vice secretary-general of the CAAM automakers group, told reporters in Beijing. The body is “cautiously optimistic” about full-year sales.

Even GM has received new hope. GM, raised its forecast for China’s market growth this year to a range of between 5 percent and 10 percent from an earlier prediction of less than 3 percent, GM Asia-Pacific President Nick Reilly, said.

India, the world’s second-most populous nation, also had an increase in February auto sales, the first gain in five months, as emerging markets avoid the world of the global recession. Germany reported a China-like 21 percent jump in February as Deutschland goes ga-ga over the “Abwrackprämie” (cash for clunkers).  All numbers, especially pre-orders, indicate that in Germany also, growth will continue unabated.

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34 Comments on “China Returns To Double Digit Growth...”


  • avatar
    bluecon

    We will see.

    The Chinese economy is in big trouble just like everywere else. Exports are way down and the government is well known for fudging the economic data.

  • avatar
    analyst

    There is no reason for them to overstate the numbers, because taxes must be paid, and if the numbers are over reported someone has to come up with the missing tax. Besides some of these sales reports will come from GM, VW, or foreign automakers; not the Chinese government.

    Yes, China is in a recession. But they will still grow 8% this year. I guess the Chinese definition of recession is when growth doesn’t reach double digits.

  • avatar
    kericf

    It is also hard to know if the “facts” you get from China are the real facts, or the Government’s Facts. Kinda like how the 13 year old gymnasts had legal government birth certificates showing they were 16. Not to say that they are not growing, just saying any news coming from China must be taken with a grain of salt.

  • avatar
    bluecon

    Bloomberg had a financial guru discussing China and he says that the 8% growth number is just fabricated and if you live in China you better agree or there is serious consequences. I think he was in Hong Kong where he said they allowed him to speak out on this.(as opposed to the mainland where you can’t)

    I watch the Chinese news and Bloomberg and they both say the economy is in trouble. And Europe is going to get clobbered. The money is running from the Euro to the US dollar.

  • avatar
    Robert Frankfurter

    @bluecon :
    March 10th, 2009 at 9:21 am

    We will see.

    The Chinese economy is in big trouble just like everywere else.

    With one big and vital difference:
    China is with Japan and the Saudis by far the biggest lender of the failed US with 1.4 Trillion US$ in Beijings cash reserve.
    http://www.theatlantic.com/doc/200801/fallows-chinese-dollars”

    The US would be happy only to have a part of Chinas most pressing problem – e.g., to much of by the day more worthless US$ in cash.

    While the US stands without any valuable industry base, having outsourced & sold out everything they once had, with a broken service specialized sector, empty handed wadding knee-deep (or better gut-deep) through a mountain of international debt – with mounting interest rates to pay for and a oncoming Credit Card crash.

    Again, most of that interest payments goes to China…

    There is only one logic solution: a “wag the dog” war must be initiated to rescue and reset the bar…

  • avatar
    analyst

    I am also tired of the gymnasts’ age argument. Nice way to demerit them. They really had a spectacular performance, regardless of their age. And we all know that Asians look younger than they really are, and that is specially true for gymnasts who are shorter by nature (and training). They were definitively NOT 13.

  • avatar
    John Horner

    All China needs to do to have a booming economy is to put more money into the hands of its consumers, of which there are many. Oddly enough, a slump in exports might be the best thing for the average Chinese citizen, because it forces the government to focus on building internal demand.

    China has the people, technology and resources to do pretty much whatever it likes. Thirty years ago it lacked the technology, but that competitive deficit has been cured. Economically, China’s central planning is working these days after decades of failure.

  • avatar

    The CAAM data are based on actual car registrations and have proven very reliable in the past. As Analyst said, there is no incentive in overstating these numbers.

  • avatar
    bluecon

    China has a relatively few wealthy and very wealthy people and a huge number of very poor.

    The wealthy got that way by paying the poor a very low wage to produce goods to sell in the west. Now the west is not buying and sooner or later this will be a big problem. (there is already much unrest in China) Chinese imports and exports are down a huge amount.

  • avatar
    analyst

    @bluecon: I assume you have been in China to verify that claim, haven’t you? This couldn’t be further from the truth.

    All this is starting to sound like envy.

  • avatar
    bluecon

    I have no envy of China. A communist country that provides it’s people very little freedom.

    @ analyst

    What is the truth?

  • avatar
    analyst

    We could drown ourselves in arguing about freedom or communism in China, but clearly you have already an irreversible case of media brainwashing on China, which in turn produce inherently biased opinions whenever the word “China” is brought up.

    The truth is that the very poor in China were even poorer before they were “exploited” and hence they are satisfied with the wages as they are. You need to understand that what might seem like a near-slavery wage for you, might be enough for people over there.

  • avatar

    The truth is that the Chinese middle class, in absolute numbers, is getting close in size to the American middle class. In percentage terms there are still many poor. But there are hundreds of millions of non-poor, not just a few.

    If you visit a major Chinese city, you’ll see FAR more retail shops and car dealers than a small upper class could support.

    BS is in Beijing. Sometimes he even ventures outside his apartment.

  • avatar
    gsp

    China will be a powerhouse.

    However their main problem is that they are not trustworthy, at least in our sense of that word. They are gamblers and often like to make money by cutting corners, thinning, short filling, etc. I have first hand experience with this.

    In spite of all this I think that their domestic market – for all products – will guarantee their success long term.

    And the fact that they have a large poor population is mostly irrelevant. A democratic country would feel the need to support the poorer areas, but centrally planned governments rarely feel the need to do that. In fact they often kick the poor off “their” land to build factories and dams. Pollution of poor areas is another problem too.

  • avatar
    bluecon

    Jim Rogers provides much info on the Chinese economy. He was bullish on China to the point of moving there so his daughters can learn Mandarin. Even he is not so bullish on the Chinese economy at this point.

  • avatar
    menno

    gsp, the chinese cut corners, etc, yes. Like cheating on the amount of calcium in milk by adding poison; by using automotive anti-freeze in toothpaste because it’s cheap (then exporting it); by using lead in paint for children’s toys (then exporting them)… by exporting cars to Europe which squash like old beer cans in the euro crash tests, etc. Oh yes, not forgetting how they don’t seem to want to grasp the idea of intellectual property (i.e. look at many of the cars they build – they are literal rip-offs of other people’s designs).

    Those kinds of cutting corners are the kind which China are becoming known for and which will slow the acceptance of their goods elsewhere. And quite rightly so.

    I have nothing personal against the Chinese. My best friend’s step-son lives and works in Beijing and he emails me sometimes with the facts of what it is like there.

    Now with the Chinese sabre-rattling against the US presence in the sea near them, will the summer from hell 2009 include a war between China and the United States, or by proxies? Taiwan? Probably not Taiwan. B.O. and the Democrats, for right or wrong, are essentially not interested in standing by friends and are all for embracing enemies.

  • avatar
    dilbert

    Since I’ve never been to Africa, it must not exist.

  • avatar
    Phil Ressler

    $585B stimulus put to work quickly achieves some of its objectives, which is good for China’s citizens and can ripple outside their borders. I’m happy to see it. But meanwhile NPR reported this morning that China’s economy is suffering a worrying deflation, with fully one-quarter of its industrial economy in distress and manufacturing unemployment climbing.

    As for China accumulating piles of “worthless” dollars, we’ve been through this misplaced panic before. When manufacturing in the US was decimated in the multiple recessions 1974 – 1983 and Japan Hoovered dollars, by 1988 it was feared they’d “own us” and industrial production would stay in irreversible decline.

    Yet by the mid-1990s, manufacturing in the US had grown in both absolute and relative terms and it was the US who was in extended boom while Japan struggled with its lost decade. Worried? I guess you haven’t noticed flight back to the dollar even as we bat this topic around.

    China has over 1B people and it’s going to advance economically. At some point China’s domestic vehicle market will exceed ours in volume on a sustained basis regardless how quickly we recover from the current slump. We’re headed for 400mm people in the US by mid-century but we’re a long way from a billion. So what? There is nothing taken from us by the expansion of economic well-being among China’s citizens. On the contrary, this is good for us and exactly what we’ve wanted and worked for since the end of WWII. The global economy is not a fixed-size pie.

    I’m not sure what the point of Bertel’s post is but it reminds me of the old Soviet boast that they were making and pouring more concrete than the US in a given year, as though there was some intrinsic significance while ignoring that at the time they had over 8,000,000 square miles on which to pave, and more people to house in large concrete state apartments.

    Phil

  • avatar
    robstrahm

    Interesting how for some, China is an amorphous giant factory. Wake up, there are different companies in China. Due to the sheer number of companies in China, even when few of them will cut costs, the sensasionalist media will not hesitate in blaming China as a whole for it.

    The cars that deform like a tin can were 1st gen Chinese cars. You can’t expect people to get it right on the first try. Yet, it took only 9 months for Brilliance to address those issues, and send in a car that got 3 stars. From then, China has introduced an NCAP program, and we can see “safety” being introduced as an important factor. Their newer cars are much better in this regard, and also in design.

    Making low quality rip offs was also observed in Japanese and Korean carmakers in their infancy. Look at them now. And again, there are many automakers in China; in different stages of development. Chery for example, was famous for blatantly ripping off the Matiz. Look at their current lineup; none of them are blatant copies, and actually look quite good.

    The lead paint case; Mattel is to be blame too. There are many unscrupulous non-Chinese who let low quality, “poisoned” Chinese products in, being aware of their problems.

    Finally, Americans don’t seem to understand that you get what you pay for. You can’t expect a product A to have the same quality as product B, costing 1/10th of its price. Almost everything is made in China nowadays, and that includes high tech and high quality products. Apple is a good example. It’s all about QC.

  • avatar
    kericf

    Menno

    You forgot “steel” that is lighter than steel.

  • avatar
    dilbert

    @robstrahm: Dubya never needed science or evidence, why do I?

  • avatar
    kericf

    robstrahm

    I agree that you get what you pay for. And if you want to save some money and buy a cheap computer go ahead, but a cheap computer isn’t going to kill anyone. Melamine tainted milk is going to kill a baby, structural steel that is 5 times lighter than it should be is going to cause something to collapse and kill people. Pork contaminated by poisoned pig feed will kill people. There is an inherent responsibility to the company to prevent it’s products from killing people. The fact is that China can’t even keep its own people safe from deadly products nor do they really care other than the fact it hurts their image. What do they care about you or me or anyone outside China. Hell, most US companies would cut as many corners as possible if they could, but they know it would be lawsuit city. Every lawyer within 100 miles would get an instant hard-on.

    China is going to grow as a power, it is inevitable. They have over 1.3 BILLION PEOPLE, how could they not eventually overtake the US on shear number alone. Not all their companies are corrupt, but the government oversight of quality in almost all industries is non-existent or corrupt at best. Companies can do whatever they want as cheaply as they want and there is little consequence until it gets out their product will kill or poison you.

  • avatar
    bluecon

    Anybody interested in the Chinese economy should watch these Jim Rogers videos.

    http://www.youtube.com/user/JimRogersChannel

  • avatar
    gsp

    Phil:

    The flight to the US dollar is about acute fear of other assets and capital markets requiring US currency for day to day transactions. These are not the same reasons people were buying American dollars in the past. The shadow banking system collapse just chopped a few limbs off our global credit system. Holding American currency (and its temporary rise in value) is more about a supply shortage than a view that US dollars are a “safe haven”.

    The cost to a currency of trillion dollar wars, tax cuts, bank bailouts, auto bailouts etc will by huge and unavoidable. This is no past experience for this type of rampant money printing of the US dollar. Buffett may be right about huge inflation sometime soon.

  • avatar
    dilbert

    Yeah, because I’d much rather die from tainted peanut butter, roll over in an Explorer (Eddy Bauer edition, gota do it in style, you know), get burnt by an exploded gas tank, breathe in asbestos, and eating a mad cow.

  • avatar
    Robert Frankfurter

    @bluecon :
    March 10th, 2009 at 1:35 pm

    Thanks for the link to Jim Rogers indeed

    Excellent!

    – that clears (provided one looks at all parts of the video) many mistakes stated on this blog. Especially from many laymen which have never set a foot to Asia but know everything through brainwashing – as has been stated above correctly – (I worked for 20 years in Asia) but also it clears the air about many misconception here regarding “Obamas Change” – which is nothing else if seen under tight scrutiny then a “Bush on steroids policy”– wrapped in very eloquent speeches.

  • avatar
    Kevin

    Germany’s growth will certainly abate once the clunker subsidy is abated — if you pay attention to the other posts on this very blog. In fact it could get real ugly at that point, as Ford knows.

    As for China, if you work through the various exceptional circumstances it looks like they’re tending to grow car sales at a few percent — a drastic decline in growth to be sure. Exactly what I’ve been expecting, assuming things don’t implode any worse, which they might. Not sure what’s the big deal here.

    Also, I’m still trying to figure out why all of a sudden people are calling China’s buses and heavy commercial trucks “autos”. Is that how the word is used?

  • avatar
    wsn

    kericf :
    March 10th, 2009 at 1:26 pm

    Melamine tainted milk is going to kill a baby

    Hell, most US companies would cut as many corners as possible if they could, but they know it would be lawsuit city. Every lawyer within 100 miles would get an instant hard-on.

    Melamine tainted milk did kill hundreds of baby. But Citi Group certainly killed thousand of people if not more.

    My logic? Money = Life.

    Yes, there is a price tag on life. You can spend the money to “bailout” those who cannot afford medical treatment.

    Say, it takes $1M to save a person’s life, then the billions of bailouts that Citi and other companies wasted would have otherwise saved thousands of lives.

    So, where is the lawsuits against Citi? Oh yeah, there are plenty. But what does Citi care? Bernanke just said major banks are not allowed to fail.

  • avatar
    bluecon

    Jim Rogers has been dead on with his predictions.
    The whole world is melting down and the US actually has done better than most, so far. Long term I think the whole of the US, Canada and Europe is in for a hard go. It looks like just a matter of time till the dollar inflates.

    from Feb. 3, 2008 Roger’s predicts the future.
    http://money.cnn.com/2008/01/30/news/international/okeefe_rogers.fortune/index.htm

  • avatar
    LenS

    The short term difference is that the “communist” Chinese actually lowered a tax to stimulate sales while the “capitalist” US is just giving more money to the bankrupt GM and Chrysler. What is this world coming to when the communists are more capitalistic than the capitalists?

  • avatar
    SpinNB

    Rogers didn’t move to China. He moved to Singapore. If he was being honest about his kids learning Mandarin then he would know Singaporeans who speak Mandarin don’t speak proper Mandarin.

    It’s like moving to Alaska to learn Ivy League English.

    If you’ve been to Singapore, you’ll suspect that his kids will learn messed up Chinese.. and messed up English.. Ok lah!

  • avatar
    Phil Ressler

    The flight to the US dollar is about acute fear of other assets and capital markets requiring US currency for day to day transactions. These are not the same reasons people were buying American dollars in the past. The shadow banking system collapse just chopped a few limbs off our global credit system. Holding American currency (and its temporary rise in value) is more about a supply shortage than a view that US dollars are a “safe haven”.

    The cost to a currency of trillion dollar wars, tax cuts, bank bailouts, auto bailouts etc will by huge and unavoidable. This is no past experience for this type of rampant money printing of the US dollar. Buffett may be right about huge inflation sometime soon.

    We’ve seen this rise in dollar demand for temporary factors against the other prevailing logic for falling value at times in the past. But demand is demand and temporary factors have a way of creating their own inertia. The US is still safe haven, for no one else of scale matches our continuous record for debt service.

    We’re *not* printing money right now. We’re borrowing. Money supply expansion has been modest and within the boundaries of money supply tuning. The effects of high current borrowing are not yet known but they do not have to be inflationary. Returning to a growth economy — which we will — gives us the option of repaying through growth or taxation or both. Don’t panic.

    We spent about $29B a year in then current dollars during the seven peak years of the war in Viet Nam. This at a time we were closing in on, and broke threshold to, the first $1T economy. So we waged the fat years of that war at a cumulative total equal to about 20% of one year od GDP on the trailing end. The war in Iraq would have to total about $3T to equal the same load on our economy.

    The nature of stimulus spending and its allocation will have varying amplifying effects. If it succeeds in helping to put a floor under the economy and along with other programs instigates a new growth vector, much of that borrowing will turn out to be cheap. Bailouts? Depends, but the amounts for auto bailouts aren’t worth worrying about. The size of finance sector bailouts are more worrisome, but only if you believe America isn’t resilient.

    When we start printing money overtime, with multi-trillion-dollars expansion out of scale to growth in our aggregate economic value, I’ll worry. You have to remember that we have also never coped with or powered through something like this as a ~$15T economy, either. The numbers are so big that by comparison to any prior crisis, they seem daunting and catastrophic. Stay calm.

    We will have a stabilized economy in a year or so, and one that is reinvigorated and growing within four. The US is going to grow and even get richer, while continuing to have somewhat less absolute advantage over other wealthy countries. This is exactly what we have intended for decades and it’s going to be OK.

    Phil

  • avatar
    Gunit

    The number one driver for reducing global worker conditions are big box stores (mainly American) that push so hard for savings that producers have to cut corners or lose the sale.

    Over the long haul the last 15 boom years and the current crisis all play into China’s hand; the boom helped them import technology and move from peasant farming to modern industrialization, the profits of which they are now shoveling into buying cheap commodity producers around the world.

    They have a growing first rate infrastructure, an ambitious work force and are graduating the best educated people in the world. In reality they are already number one. America? Think Britain before the fall of their Empire.

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