China Focuses on Domestic Consumption … Commodities See Little Change So far

AP

The Chinese government is planning new policies to boost domestic consumption, especially of vehicles and appliances, in a bid to offset the effects of sagging export demand, the China Daily reported on Wednesday, quoting a government official.

With tax rebates on vehicles and domestic appliances either having expired or due to expire, the government is working on new measures, said Huang Hai, former assistant minister of commerce and a member of the economic and trade policy consulting committee linked to the Ministry of Commerce.

These may include subsidies for families living in affordable housing that buy electrical appliances and for consumers planning to change cars, the paper said.

The daily also quoted a Ministry of Commerce spokesman as saying that the ministry was considering new programs to expand consumption, with details to be announced next week.

Huang also said over 10 government agencies, including the Ministry of Commerce, the National Development and Reform Commission and the Ministry of Finance, are expected to cooperate and propose concrete plans to boost consumption at a meeting slated for April.

China’s exports have steadily fallen over the past few months on the back of economic woes in the European Union. Exports in November expanded 13.8 percent from a year ago, the most sluggish rate in more than two years.

Europe remains China’s single largest export market, but export growth to the continent slowed to just 5 percent in November from a year ago, the third straight month of single digit growth and the smallest expansion since February 2011.

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Widely followed commodities trader Dennis Gartman on Monday said he wasn’t concerned about an official slowdown in China.

“I pay very little to what the Chinese have to say,” he said on “Fast Money.” “I think that Premier Wen speaking this morning to the People’s Congress had to low-ball his estimate for GDP going forward so that they can do better than that.”

Chinese Premier Wen Jiabao estimated GDP growth of 7.5 percent for 2012, a figure one economist called “symbolic.”

GDP growth in China is “probably far above 7½,” said the editor of The Gartman Letter. “I wouldn’t change my strategy on commodities one bit.”

India’s move to ban cotton exports came as a surprise — and raises some broader questions beyond cotton [CTCV1  92.23    4.00  (+4.53%)   ].

“I think what you are seeing, it’s playing out over in the grain markets. Look at what corn’s [  Loading…      ()   ]doing. It’s up almost 10 cents right now,” Gartman said. “What’s going on in cotton, in agricultural production across the board in India — that’s the question that it raises with me.”

In oil, Gartman thought both Brent [LCOCV1  Loading…      ()   ] and WTI [CLCV1 107.00    0.30  (+0.28%)   ] would trade lower from here.

“If there’s one trade to be done — but you have to be careful with it — the spread between nat gas [NGCV1  2.365    -0.119  (-4.79%)   ] and crude oil is going to narrow over time,” he said, adding that he was still thinking about putting on the trade but had not yet done so.

 “If you made me take a position in crude oil today, I’d probably sell it, but I wouldn’t sell it aggressively,” he said.

Stuart Frankel’s Steve Grasso said the price action in energy commodities will “probably be a blip.”

“The dangerous thing is: You want to be drawn into these nat gas equities, and I think that’s a mistake. It’s too early,” he said. “If I wanted to play nat gas, I’d buy the commodity itself.”