APRIL 2016 / NO. 2
TAGS: CHINA, PREDICTIVE, FORESIGHTS, KPI, GOVERNMENTS, BANKS, EUROPEAN COMMISSION, MEDIA, BALTIC DRY INDEX, SHANGHAI CONTAINERIZED FREIGHT INDEX, CHINA COMMODITY EXPORT INDEX, EUROPE, GERMANY

Predictive Indicators – China

“Let’s just hope shipping isn’t telling the real story of China”, Bloomberg Intelligence
In our daily strategic intelligence practices, we regularly list several Key Predictive Indicators (KPIs) to see what the near future might tell us. This is not forecasting. It is, however, based on delivering perspectives going beyond the brutal facts, by creating crucial foresight and early warning. Our governments, banks, the European Commission, national forecast institutes and our uncritical media tell us that we can expect economic growth. We don’t believe this! Our early warning analyses indicate the opposite.
From 2008 to 2014 China dragged the world out of a second great recession. However, China’s slowdown might cause a major shock to Western economies in 2018-2020. Here are some of the relevant Key Predictive Indicators:
  1. The dramatic collapse of all shipping-related metrics when it comes to seaborne trade with China: the Baltic Dry Index shows record lows
  2. The Shanghai Containerized Freight Index shows a strong drop
  3. The China Commodity Exports Index (aluminum, steel and oil products) showed a dramatic downturn
  4. Imports are weakening because of reduced spending by local governments in China, which are the dominant players in the economy
  5. The central government has withdrawn its guarantees for Local Government Financing
  6. Chinese steel mills have been pressured by losses, low prices and overcapacity as demand drops to levels unseen since 2009.
One might conclude that the manufacturing boom in the world’s second largest economy is under fierce pressure and will impact the rest of the world. Just compare this with Europe in the event that the German economy is stagnating. Is our view pessimistic or are we being realistic? We think both; we are after all strategic intelligence professionals bringing countervailing power senior management.
“If you don’t read a newspaper every day you are uninformed. If you do, you are misinformed”, Mark Twain
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