Questioning China’s Growth
The Wall Street Journal reports China Says Growth Is Fine. Private Data Show a Sharper Slowdown.
In the second quarter of this year, official Chinese data showed economic growth of 6.2%, close to Beijing’s target and within a percentage point of what it has reported every quarter for the past 4½ years.
A few months earlier, satellites monitoring Chinese industrial hubs suggested parts of the world’s largest trading economy were contracting. An index of Chinese industrial production created by a multinational manufacturer was pointing to lower growth than official figures. And a web-search index used to gauge how many workers return to their jobs after the Lunar New Year holidays was down sharply from a year earlier.
Beneath China’s stable headline economic numbers, there is a growing belief among economists, companies and investors around the worldthat the real picture is worse than the official data. That has analysts and researchers crunching an array of alternative data—from energy consumption to photos taken from space—for a more accurate reading.
Their conclusion: China’s economy isn’t tanking, but it is almost certainly weaker than advertised. Some economists who have dissected China’s GDP numbers say more accurate figures could be up to 3 percentage points lower, based on their analysis of corporate profits, tax revenue, rail freight, property sales and other measures of activity that they believe are harder for the government to fudge.
“Manufacturing is being hit really hard,” said Leland Miller, chief executive officer of China Beige Book, which measures China’s economic strength based on thousands of survey responses from mainland companies. “Investment is down, hiring took a serious hit, a huge hit to new orders.”
Pay Your Bills
As the trade war escalates, Beijing needs private companies to pull China’s economy out of its rut. But for some, ready money can be hard to find.
The New York Times reports Circulating in China’s Financial System: More Than $200 Billion in I.O.U.s
Caxin (hard paywall) reports SOEs Told: Pay Your Bills On Time
Tariffs Hurting China More than US
Tariffs are hurting China more than economists predicted. This helps explain the nation’s latest round of stimulus – it may be combatting a deeper downturn in China than some realize. https://t.co/F4NpTW9Spj
— Lisa Abramowicz (@lisaabramowicz1) September 8, 2019
That’s entirely believable. But losing is losing if both sides lose.
More importantly, the US has elections, China doesn’t.
China Gold Buying
China’s gold-buying spree nears 100 tons as trade war drags https://t.co/Mct4FFcdwk pic.twitter.com/KqnJemONHS
— Bloomberg (@business) September 9, 2019
China Accuses Apple, Foxconn of Breaking Chinese Labor Laws
China Accuses Apple, Foxconn Of Breaking Chinese Labor Laws https://t.co/Yjdz1TY4kg
— zerohedge (@zerohedge) September 9, 2019
That sounds like trade war negotiation tactics.
Questioning Chinese GDP Again
Red China hurting more than it’s letting on: “Satellite pictures, Baidu searches and data hunts. Companies suspicious of China’s official numbers are unearthing clues on how its economy is really faring.” https://t.co/mtEH16TlK0 via @WSJ
— Mollie (@MZHemingway) September 9, 2019
Benefit Australia?
Luckily for Australia, the U.S.-China trade war happened https://t.co/C7N1MU0GUl
— The Wall Street Journal (@WSJ) September 9, 2019
Crackdown
Some mainland Chinese support Hong Kong protests. China is punishing them into silence https://t.co/P1bwJD1LIg
— Los Angeles Times (@latimes) September 9, 2019
China’s Export Growth
Worst Progression
China’s trade continues to evolve in the worst possible way for the world. Exports are down (y/y), putting pressure on the yuan. But imports are down more, so China’s overall surplus is rising even as trade is falling.
1/2 pic.twitter.com/AsoEHMQ4dh
— Brad Setser (@Brad_Setser) September 8, 2019
Exports Down 1%, Imports Down 5.6%
China 🇨🇳 exports shrank in August, down 1% yoy and imports fell 5.6%.
— Daniel Lacalle (@dlacalle_IA) September 9, 2019
Is this winning?
Resultant Picture
China’s current account surplus is actually now rising quite rapidly, thanks to weak imports …
in dollar terms, after adjusting for overstated tourism deficit, it is about to equal to that of the Asian NIEs
(as a share of GDP, the NIEs surplus is still bigger) pic.twitter.com/DeQeJ7VeCj
— Brad Setser (@Brad_Setser) September 8, 2019
Yuan Ready to Float?
The yuan is starting, just a little, to behave like a conventional floating currency. And indexing makes it easy for big investors to divest from China. Latest Points of Return: https://t.co/MfzPcTBOp9 via @bopinion
— John Authers (@johnauthers) September 9, 2019
No chance with capital controls and virtually no bond market.
But here’s a more fundamental point.
Fiat Currencies Don’t Float
Fiat currencies don’t float. They sink at varying rates.
Mike “Mish” Shedlock
“China Collapsing” has been sung repeatedly every now and then over the last 40 years. But what had been collapsing is the reputation of those who have been singing this song! Lol
Mish, why would you delete a perfectly reasonable comment that contributed to discussion?
China’s economy is a Paper Tiger
China “making the phone call” last week lends support.
“But losing is losing if both sides lose.”
That depends on how one defines losing. Supply lines are a national security issue.
China’s economy like the US is built entirely on a foundation of bs and pretending,you’re slashing rates that already low,printing trillions…..EVERY MONTH tells me all I need to now about the economy!
I use job listings as anecdotal evidence of the direction of the economy. Engineers are typically the first hired and first to have hiring freezes since they are at the beginning of a new product cycle. No expectation of sales means no need for engineers.
Saving face is the most imported thing in China. They’ll continue to report everything is fine until it’s obviously not fine. I don’t believe their import/export numbers. They don’t make sense.
Given that American businesses in China like FedEx and Apple have invested major capital there and are decidedly pro China, why would they punish those same businesses by generating heretofore unimportant labor controversies, paperwork and threatening their executives with jail?!? It’s an act of desperation.
Do they not understand they are punishing those most loyal to them? They’re playing into Trump’s hands because at some point when the pressure is ratcheted up high enough they will pull back and realize how foolish banking on a Communist authoritarian government really is.