The not so good news from China

The not so good news from China

In February China’s exports were in a sharp decline (18.1 % against the same month in 2013), analysts and experts expected an increase of 5 %. Imports rose 10,1 %. In addition, a trade deficit resulted of USD 22.98 billion, the second largest since February 2012 with USD 31.5 billion

The government seeks to create 10 million urban jobs during 2014 and keep urban unemployment below 4.6 %.

China’s consumer prices rose 2 % in February, in January the figure was 2.5 %. Food prices were up 2.7 % and were the major contributors of the rise. Non-food prices were up 1.6 %.

The producer price index tracking prices for finished goods at the factory level, it fell 2 % on an annual basis, already in January there was a drop of 1.6 % against the same month in 2013. Inflation remains well within the governments set tolerance of 3.5 % annually and leave room for stimulating measures without a price increases.

Experts say that part of the deflation in the manufacturing sector results from cheaper raw material prices on global markets, which companies pass on to their customers. On the other hand, it might be an indication of weak demand in the domestic market.

The Chinese government has promised to make prices for energy and water, both controlled by the state, more market conform. If this policy is applied it could push up inflation later this year.

In the middle of the publication of these figures was witnessed also China’s first domestic corporate bond default, because a Chinese solar equipment maker, Chaorisolar, failed on March 6, 2014 to meet interest payments on a bond. The heavily indebted company had warned on Tuesday that it will not be able to meet interest payments totalling CNY 89.8 million (around USD 14.7 million), citing a credit squeeze and its inability to raise enough funds to make the interest payments. It stated that it would at its best pay CNY 4 million of interest on its CNY one billion bond. China’s total of corporate bonds could hit USD 13.8 trillion in 2014, according to Standard & Poor’s estimates. If it becomes true, China will be surpassing that of the U.S. as the largest in the world.

www.wsj.com


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