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How To Navigate China's Contradictory Data

posted 10 May 2013, 04:19 by Mpelembe Admin   [ updated 10 May 2013, 04:20 ]
Reuters Business Video Report - REUTERS ASIA ECONOMICS & MARKETS EDITOR, WAYNE ARNOLD, 

"Next week we get the next installment of China's monthly data dump. I think we're going to see two different things. On the one hand we're going to get industrial output figures. And I expect these to show..."

...us what's really happening in the underlying Chinese economy - which is a sort of a slowdown.

The market's watching this very closely to see if China's economy is, as the government wants, starting to cool down and get weaker.

REUTERS ASIA ECONOMICS & MARKETS EDITOR, WAYNE ARNOLD, 

"On the other hand we're going to see investment figures, and I expect those to be about as strong as everyone expects - up about 21 percent year on year. That's a sign of all the hot money coming back into China. There's incredible optimism, not very warranted, about China as a relative growth story in a world of sluggish growth."

That money's coming in pumping up the bubble, pumping up credit, pumping up the real estate market.

And the government is very worried about that. So we'll get two contradictory signs next week from China.

REUTERS ASIA ECONOMICS & MARKETS EDITOR, WAYNE ARNOLD, 

"Japan we get more of the same kind of a contradiction. We're going to have consumer confidence numbers, which I expect will show us that consumers are starting to catch on that a cheaper yen is translating to higher corporate earnings."

And maybe that will help them out, too.

So they're starting to get a little more confidence. Abenomics - Prime Minister Abe's policies - are rubbing off on the consumer.

We get GDP figures the next day.

 REUTERS ASIA ECONOMICS & MARKETS EDITOR, WAYNE ARNOLD,

"I think we'll start to see Japan pulling out of what looked like it was going to be yet another recession. We'll start seeing a little bit more very, very slow growth but growth nonetheless. And that will be encouraging. But where we're going to see some weakness still, I think, is in machinery orders on Friday. There, I think it's going to show us that Japan is not back yet."

And Abenomics hasn't yet really taken control - not yet gaining traction in the Japanese economy. So wait for Friday, we'll really get the toll on Abenomics on Friday when machinery orders come out.

REUTERS ASIA ECONOMICS & MARKETS EDITOR, WAYNE ARNOLD,

"There's a conference in Singapore. IMDEX - the naval defense conference. This is interesting, not because conferences are fascinating, but because this one in addition to having lots of shiny warships to look at, is going to bring together most of the Pacific Rim's top naval brass. And normally this would just be an interesting chance to go look at ships, look at uniforms and polished shoes."

But what this really is is a chance to sort of get in there and find out what are they saying to each other about regional naval security, particularly around territorial claims in the South China Sea and in the East China Sea with either the Senkaku - take your pick - or Diaoyu Islands.

What's important about this is that we want navies to be talking to each other to make sure they don't make mistakes, misread each others' signals in those waters, and turn what is a misunderstanding into something very, very serious that we end up having to mop up militarily.

REUTERS ASIA ECONOMICS & MARKETS EDITOR, WAYNE ARNOLD, 

"Not a market mover. Not necessarily an economic piece of news. But one that is potentially just as important to the region next week."


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