Home > Facts and Figures > More funny numbers from China

More funny numbers from China

The stench emanating from China’s macroeconomic indicators is getting worse, yet the news from the country’s Ministry of Truth is just as sunny as ever.  At some point the funny numbers will collide with reality, and China could be in for a meltdown.

Ambrose Evans-Pritchard writes at the Telegraph:

…China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc.

The Shanghai Container Freight Index fell 1.4pc to a record low of 919.44 in November, after sliding relentlessly for several months. It has picked up slightly since.

The Baltic Dry Index measuring freight rates for ores, grains, and bulk goods, has fallen 44pc over the last year. Kasper Moller from Maersk in Beijing said weak Chinese demand for iron ore was the key culprit.

…[R]ail, road, river and air freight volume for the whole of China fell to 31780m tons in November (latest data), from 32340m tons in October. Not a big fall, but still negative. (National Bureau of Statistics of China.)

Chinese electricity use was flat in over the Autumn, with a sharp fall in the (year-on-year) growth rates from 8.9pc in September, to 8pc in October, and 7.7pc in December.

Residential investment has been contracting on a monthly basis, and of course property prices are now falling in all but two of China’s 70 largest cities.

So how did China pull off an economic growth rate of 8.9pc in the fourth quarter?

Beats me.

Something is rotten in the state of Denmark China.

Evans-Pritchard is correct when he calls the problem “deeply structural,” saying that the “whole economy is massively deformed and tilted toward excess investment.”  And where excess investment leads to malinvestments a bubble is sure to follow.  The next bubble may be one that China is incapable of papering over.

The usual caveat applies: I do not know when the other shoe will drop.  But that it will is, to my mind, beyond question.

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  1. January 29, 2012 at 10:48 PM

    A policy lead slowdown has been in progress for some time. The ginormous stimulus post 2008 (considerably larger relative to GDP than the US stimulus) is often thought of in policy circles as having been a mistake, creating all sorts of nasty distortions and bubbls and fueling inflation, and they’ve been rushing to try and cool things off.

    I have for years read predictions of imminent doom in China. Sort of like being short JGBs, its been a widowmaker of a trade. It is deeply illogical to assume that strong macro numbers are a sign of doom (because it means the bubble is getting bigger) and that weak macro numbers are also a sign of doom (because, well, it means things are slowing down). You can’t have nothing but doom.

    That said, eventually there will be some sort of nasty blowup. Everyone knows this, including the government. However, what many commentators miss is that it is largely a *political decision* when that blowup occurs, how quickly it is cleaned up, and what the end result is. All the banks are state owned, and there’s nothing like the level of internal political bickering as you see in Europe’s present crisis (which is also largely a political one).

    $3.2 trillion of reserves (before you say it, yes, I know, there was a downtick in reserves recently) can solve a lot of issues. As can the PBOC. Its a lot easier to fix banking crises when you have political unity, near complete control over the whole system, a gazillion dollars banked, and no real external debt to speak of. It could go down in history as the most easily solved banking crisis ever, particularly given the size is likely to be enormous.

    So some sort of Argentine style blowup is extremely unlikely. That said, it is somewhat less unlikely that investors in Chinese banks will have rosy returns.

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