Over the past week, we have spent a lot of time pondering China's seemingly insatiable appetite for dairy powders. WMP and SMP imports continued to run hot through March. Is it real? Can it continue? What does it mean?
Those questions are difficult to answer without also pondering larger questions about economic health globally and in China. Events over the past week have shaken confidence in a view that all is well (or, at least, all is okay). Robert Samuelson comments on the phenomenon on the Investor's Business Daily website:
The United States and many countries approved "stimulus" programs of tax cuts and additional spending. Panic was halted. A downward spiral of falling private spending and rising unemployment was reversed. The resulting economic slump was awful. But it was not another Great Depression. The worst has passed.
Or has it? Greece's plight challenges this optimistic interpretation. It implies that celebration is premature and that the economic crisis has moved into a new phase: one dominated by the huge debt burdens of governments in advanced societies. Comparisons with the Great Depression remain relevant — and unsettling. Now, as then, we may be prisoners of deep and poorly understood changes to the world economic system.
It should not escape notice that China's equity markets have been under pressure for several weeks. The government seems intent on tightening in an effort to fight inflation. It seems reasonable to wonder about export prospects into a weak Eurozone. More to the point, will fallout from tighter credit conditions or a cooling economy put the brakes on dairy product imports? We don't yet know enough to know for sure...and there are other germane lines of inquiry to explore. At the same time, we get the sense that it would be a mistake to simply assume that everything is okay and conditions tomorrow will resemble those prevailing today or in the first quarter.
