2014-09-09

Chinese Exporters Being Squeezed

China's trade surplus climbed to a new August high: China Posts Record Surplus as Exports-Imports Diverge
Exports increased 9.4 percent from a year earlier, the Beijing-based customs administration said today, compared with the 9 percent median estimate in a Bloomberg survey. Imports unexpectedly dropped 2.4 percent, leaving a trade surplus of $49.8 billion.

The drop in imports is not a good sign. Nor is the rise in exports given the economic troubles in the EU and Japan.

From ZeroHedge:
China Hits 'Inflow' Panic Button- Strengthens Yuan Fixing By Most In 4 Years
The PBOC strengthened the CNY fixing by over 0.3% today - its biggest fixing move since June 2010 as the Yuan strengthens to 6-month highs against the USD. This seeming 'panic' move comes on the heels of last night's record trade surplus - which as Goldman notes - was likely dominated by FX inflows thanks to over-invoicing. It is unclear the reasoning for the move in the CNY fixing but one wonders if, with industrial commodities continuing to plunge (CCFD collateral value dropping) and now PMIs rolling over, if further over-invoicing is being anticipated as cover for a notable slowdown in growth. One thing is clear - after today's surge in the USD and decoupling with US stocks, something is changing.

And we know Rehypothecated Assets A Problem Everywhere

When the yuan strengthens, it destroys already thin margins for exporters. The move in the euro, pound, Swiss franc and yen has hurt these exporters. With the yuan now rising as well, it will not curb the problem, but cause more exporters to turn to over invoicing, CCFDs (Chinese commodity financing deals) and rehypothecation in their quest for survival.

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