China data over the weekend should encourage nobody. Goldman.
China’s export growth remained solid in April despite the implementation of US reciprocal tariffs, significantly above the consensus expectations, and import growth also surprised to the upside (exports: +8.1% yoy, imports: -0.2% yoy).
The resilient export growth was partly due to a low base last year.
But more importantly this was likely due to trade re-routing via other economies.
By region, export value fell materially across major trading partners, especially for exports to the US.
But China’s exports to ASEAN jumped in April.
By product, export growth of housing-related products (such as home appliances) declined notably, while chip exports jumped.
The import value rose sequentially across major products.
Overall the trade surplus was US$96.2bn in April, somewhat lower than in March.
In short, buy Kmart.
China is not escaping the deflationary vortex, and why would it as tariffs smash into industrial overcapacity and property prices deflate and retard domestic demand?
Sure, Beijing is issuing a voucher for everything to households. But that’s not consumption based upon a structural shift of income from corrupt SOEs to households.
It’s a shift of debt from private to public to temporarily boost favoured industries.
Where this total failure of structural reform shows up most pointedly is in the PPI, where Chinese overcapacity is vomiting goods for the pure purpose of doing so, not profits.
If you will pardon the expression, there is deflation in fucking everything, and all of it is spewing into the global economy, barring the US.
Investors do not want to be in any Chinese goods or inputs here.
This is margin compression on a Biblical scale.
If it does not come from upstream volume weakness, it will be forced from downstream price weakness.
Same result, either way.
Falling commodity prices.
