Same Old, Same Old (or, All That Glitters 2.0)

In my June 17, 2013 post (“All That Glitters”) I suggested that for all the glitter and breathless excitement surrounding emerging markets, there are concomitant risks and, especially recently, a number of red flags that should indicate danger.

I cited unrest in Turkey, Brazil and Indonesia to underscore the instability that can result from a lack of respect for government and/or a disillusionment with internal legal processes.

Now from China comes another reason to proceed with caution when it comes to emerging markets.

The NYT is reporting that just-released trade data confirm that China’s economic performance in recent years has been overstated, and that we may be about to witness some major corrections (in part as a result of corrective actions taken by the government.)

China’s exports are down – though this is principally the result of weak global demand – but imports are down dramatically versus expectations (a decline of .7% in imports, vs. an expected increase of 8%.)

The decline in imports reflects weakening of demand and purchasing power, which in turn suggests that consumers and industrial buyers are unwilling or unable to make the kinds of purchases that both mirror and fuel economic growth.

It could be all part of a plan on the part of the Chinese government to crack down on inflated export figures and to report data more accurately. These would be positive steps towards developing the kind of openness and credibility that investors crave. There are also indications that China’s leaders are prepared to nudge the country further into less fettered participation in the market (which means that the economy has to take the bad with the good. The release of revised data may be a part of the process.)

All of this is to suggest, however, that while many have been chasing rainbows in exciting high-growth markets — and, it must be said, some have achieved great things — the reliable, slow-growth, oh-so-predictable markets of, say, the United States and Canada continue to produce profits and opportunity, day in and day out.

A new, dedicated webpage posted by Canada’s Department of Foreign Affairs and International Trade highlights the depth and breadth of the cross-border relationship.

Among the amazing factoids noted:

  • The US and Canada exchange $1.3 million in goods and services every minute
  • Canada purchased $233 billion in goods from the US in 2012, which is more than China, Japan and the UK … combined
  • Canadian-owned companies operate in 17,000 locations across the US, and employ 619,000 Americans

As I’ve said before, sometimes the same old markets are the most reliable markets. Sometimes all that glitters isn’t gold.

Even as we diversify markets and build export capacity enabling us to expand our reach, we’d be wise to nurture and tend the relationships that have supported the most successful bilateral relationship on the planet. Click here to see how US – Canada trade and investment play out state-by-state in the US.