Dogged by Lousy Global Demand and Wild Overcapacity, China Containerized Freight Index Crashes to Worst Level Ever
by Wolf Richter
WolfStreet.com
December 8, 2015
Bad breath of zero-interest-rate era wafts over real economy.
To the chagrin of the government, China has one export that is booming: capital flight.
Fearing further devaluations of the yuan, a terribly inconvenient crackdown on corruption, political purges, and other mayhem, wealthy Chinese are trying to get part of their money out of harm’s way. Capital outflows tripled to an estimated $113 billion in November from October.
To prop up the yuan in face of this sort of capital flight, the People’s Bank of China has been selling foreign currency, including US Treasuries. As a consequence, its foreign exchange reserves plunged by $87 billion in November to $3.396 trillion, the lowest since February 2013. The export of capital is a booming business in China.
Actual exports weren’t so lucky, according to China’s General Administration of Customs. In November, they dropped 6.8% year-over-year (3.7% in yuan terms), after a 6.9% swoon in October. They’re down for a fifth month in a row. They’re a sign of crummy global demand for Chinese goods.
This has been the story of the Caixin Manufacturing PMI, which tracks manufacturing activity in China via a survey of purchasing managers. It has been mired in contraction mode for nine months in a row.
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