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China

April 11, 2012 – 5:02 pm

China is going to release their first quarter GDP numbers later in the week but we have seen recent stats that give us an idea of what is happening in their economy and it appears to be better than the experts have lead us to believe.

The recent CPI number increase 3.6% and car sales rose 4.5% month over month. Both numbers were sharply higher than expected. Exports have fallen for China mainly due to the weakness in Europe, a major trading partner for China. Internal consumption is also a little weak but that only means that exports and internal consumption is growing slower, not contracting.

This morning an article in the Wall Street Journal discussed China’s buying of oil which has picked up lately despite slower demand in growth. Apparently, they are increasing their reserves of oil which currently stands at a 40 day supply. The U.S. supply is 90 days and China wants to eventually get to that level. They have recently completed some storage facilities and are filling them up and have more under construction that will be completed by the end of this and next year. Mind you their demand for oil is still growing at about 6% per year so they have to buy or produce more than they consume to increase their reserves.

What this might mean is that China could start its own version of QE thus sparking their economy. That would likely take the form of infrastructure spending as they do not want to add to inflation (which perked up last) month to uncomfortable levels.

This might translate into a better Chinese stock market that has been mired in the mud for two years. Then again China is a high risk environment.

Good Trading
Steve Peasley

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