China Passes More Milestones... Time to Slow Down?

Two more notable milestones for China:

First, Chinese banks are now the most highly (over?) valued banks in the world. If you measure a company’s worth by price-to-book value, there’s been a remarkable changing of the guard. There’s quite a few different ways to take in this chart… we’ll let you come to your own conclusion:

High Price-to-Book Ratios

Second, China is now the world’s biggest exporter (according to their data, anyway). The Red nation announced over the weekend that 2009 exports exceeded $1.2 trillion, edging out Germany’s current forecast for the No. 1 spot. Exports rose in China by 17% over that last year, beating foreign estimates by fourfold. Chinese import numbers are even more staggering — up a whopping 55% in 2009. Australians, which now count China as their No. 1 trading partner, have to be pumped about that… so long as China keeps it up in 2010.

“It’s likely that the growth we saw in emerging markets in 2009 will decelerate,” opines Dan Amoss. “China’s infrastructure-heavy stimulus package put Chinese people to work and boosted commodity imports from resource-rich countries like Brazil and Australia.

“The potential catalysts for a correction in China are many, but the most likely would be continued escalation of trade protectionism. This protectionist trend could offer several attractive short ideas in 2010…

“The interference of governments into free trade — in the form of both subsidies and tariffs — is not good for the future of globalization. Many of today’s big transnational corporations are built on the assumption of unending globalization. These big corporations are establishing closer ties to politicians around the globe, and many are seeking to game the system or pursue government subsidies, rather than serve their customers.

“Rising trade protectionism also threatens to transform many of the capital investments made over the past decade into losers. You may have noticed a consistent theme among most of our 2009 short ideas: high asset growth. Many global companies that expanded their balance sheets to add capacity were reacting to false market signals during the credit bubble. But now that demand for these companies’ products or services remains well below supply, losses will persist and industries must shrink capacity to match a new level of austerity.”