Professional Documents
Culture Documents
Dan Zhou Robert Zhang, CFA Steve Chen Han Wang, Ph.D. Yongyuan Qiao, Ph.D.
dzhou@cebm.com.cn rzhang@cebm.com.cn ychen@cebm.com.cn hwang@cebm.com.cn yqiao@cebm.com.cn
Our CEBM China export leading indicator has already peaked, indicating that China’s
exports are likely to peak soon. Our export model suggests that China’s exports may
decelerate from 3Q due to weakening domestic and foreign demand.
The latest Korean export data in June remained strong. Based on the evidence from both
export destinations and export products, we maintain our estimation that China’s export
is expected to grow 30% Y/Y in June.
As the government has unofficially adopted normalization strategy away from the
stimulus we are likely to see property, infrastructure, and manufacturing investments
lose steam in the second half. The deceleration of FAI may put downward pressure on
China’s imports.
CEBM Group 1
CEBM research reports are published solely for informational purposes for qualified investors. Nothing in this report constitutes a representation that any investment strategy
or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances or otherwise constitutes a personal recommendation.
China Macro
55
45
35
25
06/03 07/03 08/03 09/03 10/03
Source: Bloomberg
Chart 2 CEBM Leading indicators Have Already Peaked
70% China's Exports (Y/Y) 2
Leading indicator(RHS)
50% 1
30% 0
10% -1
-10% -2
-30% -3
06/03 07/03 08/03 09/03 10/03
Source: Bloomberg, CEIC, CEBM Group
140
100
100
60 60
07 08 09 10 07 08 09 10
As mentioned above, China’s imports is likely to decelerate in the second half as harsh
Major measures takes effect gradually. Imports can be broken down into processing imports and
commodities ordinary imports, so the impact of decelerating domestic demand can be analyzed
include: rubber, separately. Processing imports are by nature affected mainly by the foreign demand. In
iron ore, copper contrast, ordinary imports reflect true Chinese demand.
ore, coal, crude Major commodities are the dominant component of ordinary imports, with the share
oil, refined reaching as much as 40%. Since 2003, the share of major commodities to total ordinary
petroleum, imports showed a clear upward trend. Although both the seasonally adjusted commodity
copper waste, etc. imports and the processing imports have almost reached the pre-crisis high, the
commodity imports have been more volatile, suggesting once again that the commodity
imports are much more important in determining the direction of China’s imports.
It is worth noting that volatile import items, like aircrafts and ships, remained largely
stable and not at all significant in affecting total ordinary imports, which is against market
expectation. The share of volatile imports remained around the historical average and
stayed at a low level. Motor vehicles account for 80% of the value and excluding them
would result in a negligible number.
Chart 13 Govt & Corp Bond Index Chart 14 Shibor Rate (%)
126 Government Bond 144 3.4 1W 3M
3.2
125 Corporate Bond (RHS) 142
3
140 2.8
124 2.6
138 2.4
123
136 2.2
122 2
134 1.8
121 132 1.6
1.4
120 130 1.2
09/08 09/11 10/02 10/05 10/01 10/02 10/03 10/04 10/05 10/06 10/07
Source: Wind Source: Wind
Chart 15 Interbank Market Repo Rate (%) Chart 16 Yield Spread (bps)
3.5 4.5 Spread (RHS) 190
O/N 7D
5Y Corporate (AAA) 180
3 4 5Y Government 170
160
2.5 3.5
150
140
2 3
130
2.5 120
1.5
110
1 2 100
10/01 10/02 10/03 10/04 10/05 10/06 10/07 10/02 10/03 10/04 10/05 10/06 10/07
Disclosure: CEBM research reports are published solely for informational purposes for qualified investors.
Nothing in this report constitutes a representation that any investment strategy or recommendation contained
herein is suitable or appropriate to a recipient’s individual circumstances or otherwise constitutes a personal
recommendation.