China's Most Expensive Export: Price Inflation

By: Reggie Middleton | Tue, Jan 19, 2010
Print Email

As you recall, my take on the deflation vs inflation debate is much less crystal ball-ish than many other pundits on the web. I never was very much into fortune telling or forecasting the future. From what I observed and researched, if I had to make a call that call would be stagflation.

On that note, here is an interesting note from one of my site's subscribers on how China is exporting to what is amounting to stagflation to the United States, now!

Hi Reggie, I thought it was interesting to get a price increase from China when we have deflation over here, since you just wrote a China and stagflation piece I though it maybe of interest to you.

I am in the furniture business and took more of an interest in investing through your site. My company imports furniture from various Asian countries, Costco is our largest customer. Costco had two Furniture only stores, doing $120mil in business for the both stores, they closed these stores last year , due furniture not being a growth area for them going forward (they still sell through their regular stores and .com)

At that same time this was only June last year, Chinese factories were laying workers off, said workers returned to their homes mostly in the country. Now we have factories in China raising prices on products destined for deflationary markets, not by a small amount either, 6-10%!


And a few days laters...

Hey Reggie,

Here comes something on this price increase issue again!, really all this is happening very fast and at high $/% increase levels.

Attached is a summation of our suppliers announcement (this is sent to Canada customers though not sure about US, though TPEB is East to West) and it indicates right off the bat "that the situation is expected to get worse - increasingly similar to conditions back in 1998 (when there was a huge surge of bookings combined with capacity cuts on Transpacific resulting in 3 week backlog and a $1500 increase per 40ft"

You will have more economic info at your hands than myself, though this is what I know.

1998 was probably (again you may know more), the begging of mass volume exporter from China, therefore not enough vessels to ship this quick jump in volume, China joined WTO in 2001 and exports started to explode.

The drop in 08 exports led to a decrease in the container ship fleet and now we have stimulated re-bound.

The shipping companies have not been pulling ships back into service, they mostly likely waiting to see what orders are like after Chinese New Year, hence we have low carrier vessel capacity.

The letter states immediate GRI (general rate increase) stating that TPEB (Trans Pacific East bound) is below the Europe rate route. These increases will impact goods that are currently in production or awaiting shipment, most goods will be already sold or quoted on, increase's cannot be passed on immediately.

When we had went through GRI's up to 2007, we could pass it on easily as increasing business was easily able to absorb this, then we had a crash in prices with increases now coming fast within 18 months, the up and down of prices so quickly is difficult, it is possible we can see these GRI's removed by the 2nd qtr as Chinese new year shipments do get bottled neck due to 2-3 week shut down depending on factory, mostly though the stimulus is creating this demand which the carriers cannot deal with due to many ships being anchored.

I have not included the supplier letter since I have yet to get explicit permission from the reader yet. Below, is what I have had to say in the past on the topic.

On inflation, deflation, and stagflation:

On China:



Reggie Middleton

Author: Reggie Middleton

Reggie Middleton

Reggie Middleton

Who am I?

Well, I fancy myself the personification of the free thinking maverick, the ultimate non-conformist as it applies to investment and analysis. I am definitively outside the box - not your typical or stereotypical Wall Street investor. I work out of my home, not a Manhattan office. I build my own technology and perform my own research - in lieu of buying it or following the crowd. I create and follow my own macro strategies and am by definition, a contrarian to the nth degree.

Since I use my research as a tool for my own investing to actually put food on my table, I can stand behind it as doing what it is supposed too - educate, illustrate and elucidate. I do not sell advice, I am not a reporter hence do not sell stories, and I do not sell research. I am an entrepreneur who exists just outside of mainstream corporate America and Wall Street. This allows me freedom to do things that many can not. For instance, I pride myself on developing some of the highest quality research available, regardless of price. No conflicts of interest, no corporate politics, no special favors. Just the hard truth as I have found it - and believe me, my team and I do find it! I welcome any and all to peruse my blog, use my custom hacked collaborative social tools, read the articles, download the files, and make a critical comparison of the opinion referencing the situation at hand and the time stamp on the blog post to the reality both at the time of the post and the present. Hopefully, you will be as impressed with the Boom Bust as I am and our constituency.

I pay for significant information and data, and am well aware of the value of quality research. I find most currently available research lacking, in both quality and quantity. The reason why I had to create my own research staff was due to my dissatisfaction with what was currently available - to both individuals and institutions.

So here I am, creating my own research for my own investment activity. What really sets my actions apart is that I offer much of what I produce to the public without charge - free to distribute and redistribute, as long as it is left unaltered and full attribution is given to the author and owner. Why would I do such a thing when others easily charge 5 and 6 digits annually for what some may consider a lesser product? It is akin to open source analysis! My ideas and implementations are actually improved and fine tuned when bounced off of the collective intellect of the many, in lieu of that of the few - no matter how smart those few may believe themselves to be.

Very recently, I have started charging for the forensics portion of my work, which has freed up the resources to develop the site to deliver even more research for free, particularly on the global macro and opinion front. This move has allowed me to serve an more diverse constituency, which now includes the institutional consumer (ie., investment turned consumer banks, hedge funds, pensions, etc,) as well as the newbie individual investor who is just getting started - basically the two polar opposites of the investing spectrum. I am proud to announce major banks as paying clients, and brand new investors who take my book recommendations and opinions on true wealth and success to heart.

So, this is how I use my background and knowledge in new media, distributed computing, risk management, insurance, financial engineering, real estate, corporate valuation and financial analysis to pursue, analyze and capitalize on global macroeconomic opportunities. I have included a more in depth bio at the bottom of the page for those who really, really need to know more about me.

Copyright © 2007-2016 Reggie Middleton

All Images, XHTML Renderings, and Source Code Copyright ©