The Chinese economy may be beset by a laundry list of vexing concerns, but external demand isn’t one of them.
Exports surged more than 27% in October, data out Sunday showed. That was far ahead of the 22.8% economists expected and near the top-end of the range.
It marked the 13th consecutive month during which shipments grew double-digits (figure below).
Imports rose 20.6% YoY, less than expected, perhaps underscoring lingering concerns about domestic demand.
The Chinese economy decelerated dramatically in the third quarter amid a confluence of headwinds. Beijing’s property curbs succeeded in triggering a mini-meltdown for developers. Officials are keen to insist that Evergrande can be ring-fenced, but new evidence of spillovers makes headlines every week. The crackdown threatens to choke the housing sector, which contributes around 20% of GDP. On some estimates, the Chinese property market is the largest asset class on the planet.
Meanwhile, the regulatory blitz associated with Xi Jinping’s “common prosperity” push has weighed on market sentiment for more than a year, while simmering tensions with Taiwan make an already fraught geopolitical situation still more tense. And then there’s the power crunch.
Coal imports doubled in October versus last year, but as Bloomberg noted Sunday, “imports of nearly 27 million tons were still 18% below the annual high reached in September — and at their weakest since May — after Beijing boosted efforts to raise domestic production of China’s mainstay fuel.”
Some of the squeeze is attributable to Beijing’s efforts to meet environmental targets, but pandemic effects made the situation worse. “It presumably was not the intention of policymakers to provoke a sharp tightening, at least when the [environmental] goals were initially formulated [but] the peculiar nature of the COVID shock has made the economy more energy-intensive, at least temporarily,” Goldman said, several weeks back, adding that “the boom in exports has boosted energy-intensive manufacturing industries [while] efforts to reduce coal-fired related emissions and a reduction in coal imports have affected supply levels at least on the margin, contributing to a sharp increase in prices.”
Although China has succeeded in pushing down prices, measures of factory activity suggest the situation is far from resolved (figure below).
The official manufacturing PMI remained in contraction territory in October for a second month, and some worry the non-manufacturing sector will succumb in November amid efforts to contain the country’s worst COVID outbreak since the virus originally surfaced nearly two years ago.
In addition to virus containment protocols, domestic demand is also at risk of rising prices if producers are ever allowed to pass along surging input costs to consumers.
In any event, the global recovery and elevated demand for cheap goods is still bolstering exports ahead of the holiday shopping season in the West.
China’s trade surplus hit a new record last month at $84.54 billion, nearly matching the highest estimate.
I do believe that within my life time, the shift to nuclear energy will occur. There is a huge gap between the fear that people have regarding a potential nuclear disaster and the facts of how current day nuclear reactors, with better built in safety measures, can be built. This will take education and time, but that gap will be overcome.
More, but smaller, nuclear power generators will be a big part of the answer to a lot of the current problems that mankind is currently facing. Then there is always the hope of scalable fusion. From lack of power throughout the world, oil cartels, military industrialized complex, global wealth inequality, just to name a few.
I have been doubling down on my “fact based” reading on climate change and nuclear.
Concur on the promise of modern nuclear; it could be invaluable as a bridge technology, or even a long-term component of sustainable energy: a zero-emission grid is challenging; a net-zero grid, much less so. (I have my doubts about practical terrestrial fusion, and orbital fusion brings its own host of problems.)
We have, of course, made no progress on containment or disposal of spent fission fuel. It continues to languish in the reactors where it was used, as it has for decades, magnifying the potential for disaster in case of an errant tsunami or other breach of containment.
Assuming we nail containment, it’s hard to equate nuclear “pollution” to fossil fuels. It takes energy to refine uranium, to be sure, but properly stored toxic gunk will never contribute to greenhouse effects. Improperly stored, it still belongs to a different pollution “economy” than CO2: a far less liquid, more localized market for mayhem and disruption. Maybe that’s for the better; CO2 works so subtly that we succumb to boiling-frog effect.
My biggest doubt about nuclear regards time frames: there is so much to be engineered, proven, built and deployed, all under some of the strictest regulatory regimes known to humankind! Should we skimp on safety? Surely not. How do we deal with nuclear’s extremely long lead time – much less diffuse the PR situation that keeps progress in check – on a time frame that will contribute materially to the 2100 1.5C goal or mitigate our quotidian power crises?
No free lunch. Promising technology, yes. But so hard to master!
+1
I’ve also been doing fact-based reading about confronting climate change with nuclear power. In addition to traditional approaches, there are approaches to nuclear that create and use nuclear energy through non-traditional methods. They may even use nuclear waste as a fuel source.
The options are still being developed. They appear to be safe, though obviously complex, and require time to evolve and find acceptance in the market. But the hope of seeing this in our lifetimes is not unreasonable. And I’m curious to learn what options find audiences in the market and how social perspectives about nuclear evolve with adoption. The idea of mini-reactors sounds intriguing. They would be useful tools in energy security across the country. They would innovate the provision of power, enable power reliability and certainty, and likely enable new approaches to business activity.
Coincidentally, found a link today on Reuters about Rolls Royce building and implementing small modular reactors in the UK. Rolls Royce also builds reactors for British submarines, which use a US design, so they have expertise.
https://www.msn.com/en-us/money/topstocks/uk-backs-rolls-royce-mini-nuclear-plants/vi-AAQv8b1?ocid=msedgntp
Beijing does not have the restraints on nuclear energy development that the West currently has.
They are developing and building a new generation of nuclear power plants, as we speak.
They are likely to leapfrog us on clean energy and the resulting economic and environmental benefits.
Right now they’re building a nuclear plant that uses thorium molten salt reactors, which provide a safer approach to nuclear waste. This is the option I mentioned in my comments above, which referenced a nuclear reactor that burns current forms of spent nuclear fuel, which can be used for nuclear weapons and requires 10,000 years to become safe. Thorium reactors use this spent fuel to create electricity. The detritus of that process remains radioactive for 500 years, though it is less potent.
Ah yes, as Xi raps in his career-defining git, “You’re having external demand problems? I feel bad for you son. I got 99 problems, but exports ain’t one.”