The JANUARY Effect In China.

While much of the investing world was focused on the Dow’s 9% decline in January, setting the tone for the rest of the year, China’s Shanghai Composite closed the month 9% higher instead. If the shot clock didn’t run out on them (the market was closed from January 23 till the end of the month), the difference would have been even more pronounced, judging by the additional 9% it’s advanced since then (at least as of this writing).

The most recent data shows Chinese stocks made up around 6% of the world’s equity-market capitalization. By comparison, about the same percentage of the Dow is made up of Alcoa, General Motors, Pfizer, General Electric, Bank of America, Citigroup, and Intel. Each of their Januarys cost the Dow a combined 188 points.

Which is more telling - 6% of the Dow, or 6% of the world?

There are plenty of reasons to doubt growth statistics from China. There will be plenty of economic disasters, for example, born from finding jobs for young workers (which I’ll take over finding entitlements for retiring workers any day). Manufacturing stuff for consumers around the world who can't buy as much of it will show up in their numbers as well - and it won't be pretty.

But here's an interesting clue to solving the bigger riddle of just how much China is embracing capitalism. China had to dramatically raise export taxes on Urea, a fertilizer compound, for 2 compelling reasons. Inventories are at 5-year lows, and China is afraid of running out- (now that's not good for the plantations in Malaysia!) But here’s the more interesting fact: China's been exporting more than half its domestic production, because prices offered elsewhere were even higher. Capitalism is collliding with domestic consumption. Remember when that happened to the US?

Looking back at 2008, There were many untrustworthy numbers coming from the US as from China. A statistic that's harder to keep down is the approximately 80 million people (about the size of Germany) added to the world’s population last year.

Yes, I’m biased - bailouts in any country make less sense to this German farmboy than bales in every country.