We want too much out of China. We want its government to offer more transparency about its policies and to offer more stability in its financial markets. Instead, we get dithering, no real stimulus and a gang that couldn't shoot or trade right when it comes to putting money to work and offering controls in its stock market.
They aren't as clueless as our authorities in 1928-29, but they do make themselves look like the fools our authorities were in 1987 before we realized that aggressive, dynamic portfolio insurers could drive an entire market down with the relatively new concept of an S&P future and its inability to integrate with equities.
At the same time, they are exhibiting fear and loathing in dealing with a bubble of their own creation similar to the investment banking fueled dotcom boom, which sucked in as many investors per capita as theirs has.
This was the week we saw they don't know what they are doing and they are making it up as they go along. The party's perceived invincibility took still one more hit.
But that's the stock market.
It's the real market that's taking its toll globally. I watch the Baltic Freight Index and it has been off by dribs and drabs for months now. All the chartering of all the ships taking raw bulk goods to China show endlessly declining demand, despite repeated rumblings of true stimulus.
If the Chinese government is really stimulating, they are doing a terrible job of it.
And that's the real rub. In a world of marginal growth, China has been pretty much the buyer of every raw good out there. Now it seems to have turned seller, dumping everything from aluminum to steel on the world markets.
The problem with that is that unlike the United States, China had been a place for emerging markets to sell goods. Without that demand we have too much of everything involving the basic building blocks of commercial construction, notably the metals and mining and equipment that drives capital good consumption. Notice, not coffee consumption, or fried chicken consumption or sneaker consumption.
You lose that market and you lose global growth and emerging growth. That's the real impact on the world's economy, and the ripple impacts are being felt by all companies in this country that export goods everywhere.
Is Caterpillar (CAT) really crushed by China? As my friend and excellent capital goods analyst Alex Blanton points out, Caterpillar provides engines and earth movers for raw goods producers around the globe. So China's lack of demand reverberates globally, and business to China is only one negative piece of the puzzle.
Right now, we have not only capital goods being a depressant. There is no doubt, from the preannouncements last night by Cirrus Logic (CRUS) and Qorvo (QRVO), two key cellphone providers, that the endless demand for cellphones has peaked, too. That could be from China, or it could be from people in countries that sell goods into China that had been reliant on Chinese demand. The same thing could be said for worldwide growth in auto sales. Ford's (F) huge reliance on Latin American sales for autos and the concomitant decline from there can also be traced to the real capital goods economy in China.
Quite frankly, I am not saying we have lost China. I am saying that the Chinese stock market, while not particularly tied in to the commodity markets -- the companies heavily weighted in the Shanghai index are financials, not capital goods or consumer companies -- is an exact reflection of a slowdown in China. It's more a reflection of a combination of a lack of transparency and insight into how a stock market should work and isn't.
But the economy? It might be growing, but it is no longer responsible for the demand needed to sate the goods of other countries that have relied on its endless growth and that, not the ridiculous, immature handling of the stock market and all its accoutrements, is the real problem. In a world where there isn't enough growth, China is a massive problem and one that seems to be getting worse, not better as the months drag on.