Red Flags: Woeful China Trade Figures Underscore Litany Of Concerns
You can shelve your bullish China macro calls.
On the heels of another concerning read on consumer prices (where that means the world's second-largest economy was back to flirting with deflation last month), Beijing on Friday reported a truly unfortunate set of trade figures.
Exports fell nearly 8% in dollar terms last month, China said, the first drop since October and the worst showing since August.
The decline was triple the drop seen by analysts. Imports, meanwhile, contracted nearly 2%
Now THIS, is what “tough on China” looks like.
On a tangent, see news China ordered domestic telcos to eliminate INTC/AMD x86 processors from core systems by 2027. Follows order to government offices to eliminate AAPL handsets. Granted, Chinese domestic telcos and government offices are probably a low-single-digit percent of INTC/AMD’s China revenues. But govt offices probably a tiny pct of AAPL’s China sales, yet we’ve seen significant decline in AAPL’s China revenues. Sure, latest Chinese Zhaoxin x86 processor reportedly might be competitive with a midrange consumer INTC/AMD processor from 2017-ish. But most PC users don’t need top performance anyway.
Fits with China’s drive to build domestic semi capability. Most at-risk Western semis should be lagging-edge, discretes, analog/mixed-signal – but high profile names also at risk for political, signalling, pressure reasons.
More broadly, China has a lot of excess capacity – manufacturing and human – so makes economic sense to replace Western products with domestic products throughout economy, in addition to national security/industrial policy motivations. Already mostly done with many consumer goods (apparel, personal products, autos, consumer electronics) and many industrial goods. Next steps – semis, airliners/engines, pharmaceuticals, medical instruments/devices? In 5 years, how many new orders will BA/EADSY be getting from Chinese domestic carriers, for that matter how many engines will GE/RTX/RR-LON be selling into China?
Take any Western company’s China % global revenues, estimate portion of that for Chinese domestic users (as opposed to re-export), and consider eliminating that revenue from long-term growth assumptions.
@H I would appreciate your view on the following, which is a follow-up to a prior question. In the event that Chinese stocks / ADRs become untradable on US stock exchanges (eg in the event of a Taiwan invasion), do you think it likely that Hong Kong equities will suffer the same fate? As an aside, it is not clear to me whether in the case of Russian stocks, this restriction was imposed by western countries or Russia (capital controls) or both.
You can look at what happened with shares of CNOOC and China Life. If you wanted to hold those shares, you would have to have an account that allowed you to trade on the HK exchange.
But your question may be if the US would also ban US citizens from trading on any Chinese stock exchange or even owning Chinese shares?
Who knows? I recall that US citizens were (or still may be) prohibited from trading in Cuban debt. You had to go through a Canadian firm. But the details are hazy as I’ve aged.
Well, it seems this stuff will be taking a back seat here.