China isn't reopening, it has reopened. This is it. And despite the record savings the population has accumulated over the last three years we are not seeing a wave of demand in the domestic economy. Using one of the most basic proxies for what is actually going on, the price of pork, the grand reopening, is, to say the least, muted. This is especially true considering the country just celebrated the largest, most festive holiday on the calendar.
From Reuters via European Supermarket Magazine, January 31:
Danish Crown Says Chinese Pork Demand Subdued, Set To Cut 550 Jobs
Chinese consumption of pork remains subdued and normalisation could take up to six months, said Danish Crown's CEO, who also told Reuters the company would lay off 550 staff in Denmark and Germany and cut capacity at its Essen plant by 40%.
Chinese pork demand is weak despite relaxation of the country's COVID-19 policies as many people continue to avoid restaurants, said Jais Valeur, the head of Europe's biggest pork producer.
"Right now I don't see any signs that Chinese imports are on the rise," Valeur told Reuters in an interview, adding that the Chinese market would probably normalise within six months.
The North Asian country's imports of pork - the most popular type of meat in the country - have halved over the last 18 months due to higher domestic production, low prices, and tepid demand....
....MUCH MORE
One data point does not make a trend but it does raise the possibility that the facile expectation of a boom in Chinese consumption is wrong.
What if, and I'm just spitballing here, what if the giant ball of savings is being targeted by the rapidly aging population as a retirement cushion, i.e. future consumption, not current?
That would leave China's export economy to carry the weight.
And that is not looking very promising at the moment:"China Quietly Launches QE: Beijing Orders Large Insurers To Buy Bonds To Contain Selling Panic"
I'm telling you, there is something very wrong with China's economy....
"Chinese factories are shutting down two weeks earlier than usual ahead of Chinese New Year"
It really is starting to appear that China could see a recession* caused by slowdowns in their Western customers' economies.
It's only recently that we've started thinking the previously unthinkable:
December 1 "What If Our Understanding Of China's "Zero Covid" Is 180 Degrees Wrong?"
That last post floats the idea that the economic downturn is not a result of the insane lockdowns but rather that the lockdowns are a tool to keep inflation from going bonkers as the government/Communist Party pours liquidity into the system to prevent collapse initiated by the property developers.
If this is the case, the insurance company/bank bond buying isn't so much a QE move but an effort to contain the growing suspicion among the Chinese investor class that all efforts to stave off economic collapse will have the same result they saw in the West: Inflation.
Ergo, get out of fixed income while you can.
The big dog in macro:
