China growth ‘only’ 6.8%

I’ve got the impression from coverage of the economic situation in China generally and on their share market slide in particularly that things must be getting bad there.

But the ODT reports China’s GDP up 6.8% on year ago.

China’s fourth quarter gross domestic product (GDP) has largely met expectations, coming in at 6.8% compared with a year ago, but still the slowest growth since the global financial crisis.

The revealing of Chinese economic data initially saw Asian markets rise modestly, but an hour later were trading down slightly, the lack of negative news giving some reprieve to markets hard hit in earlier weeks.

Craigs Investment Partners broker Peter McIntyre said release of the economic data had “no real surprises” for the market.

In the global context, China’s growth remained “exceptionally good”, albeit down on previous years’ 9% growth, he said.

Global sharemarket jitters so far this year have been hanging on the GDP delivery, with China’s markets entering a sell-off bear market with around 20% losses, while others are down 5%-10%, since New Year.

Reuters reported full-year growth at 6.9%, as expected by the markets and analysts, and roughly in line with the Chinese Government’s target of around 7%, but it was the slowest pace of expansion in a quarter of a century.

So it’s “the slowest growth since the global financial crisis” and “the slowest pace of expansion in a quarter of a century” – if the quarter century claim is correct the GFC claim must be correct.

Huge growth in China couldn’t be sustained. 7% growth still sounds quite a lot especially considering the size of China’s market.

After being a major locomotive of global growth in recent years, China is now in a protracted slowdown, weighed down by weak exports, factory overcapacity, a soft property market, high debt levels, slowing investment and a government anti-corruption campaign.

Separate data from China yesterday revealed industrial output rose 5.9% in December from a year earlier, but missing market expectations, as its manufacturers struggle with persistently sluggish demand at home and abroad, excess capacity and high borrowing costs; analysts polled by Reuters had expected a 6% factory output increase.

Protracted slowdown, weighed down, overcapacity, soft market, slowing, struggle, sluggish.

How many other countries would love to have GDP growth of 7%?

In the medium to longer more modest growth in China must be a good thing. They couldn’t keep expanding at their past rates without risking serious problems.

Kenneth Kim at Forbes in What’s Going On With China’s Stock Markets and Economy? on whether China is going into a recession:

I highly doubt this. Sure, the estimated Chinese GDP growth rates of about 7% in 2015, and forecasted to about 6-7% for 2016, are kind of hard to believe, but even the most skeptical economists in China still believe its GDP growth rate will be about 3% in 2016. A 3% growth rate is not great, but it’s still positive growth and beats what the U.S. has been doing lately. And a 3% GDP growth rate certainly does not put China into recession territory, especially for an economy that has already grown a lot recently.

It looks like a significant adjustment to lower growth rates but it’s still enviable growth.

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11 Comments

  1. Brown

     /  20th January 2016

    You have to be mindful of some issues around this figure.

    China was growing off a very low base.

    It needs the 10% plus growth rate to be growing usefully.

    The figures are likely bullshit with much evidence outside the official stats that its not growing at anything approaching 7%.

    Reply
  2. Klik Bate

     /  20th January 2016

    And the elephant which is still in the room of course, is debt.

    Core Chinese debt has mushroomed from 187% of GDP since the end of 2009, to 244% of GDP today. And it isn’t just a Chinese problem, it is a global one.

    Reply
    • Blazer

       /  20th January 2016

      its not a problem for the US though…they can just ‘print’ more money to satisfy debt…so long as they maintain the military might to enforce the greenback as default currency for world trade.

      Reply
      • kittycatkin

         /  20th January 2016

        If that’s all that they need to do, I wonder why they don’t/

        Reply
        • Blazer

           /  20th January 2016

          well dear,thats exactlly what they have been doing…for quite sometime now.Ever heard of…’quantitative easing’?

          Reply
          • kittycatkin

             /  21st January 2016

            They have just been printing more money, as one does in Monopoly when the money runs out ? Wouldn’t that make the money worthless pieces of paper ? Printing money doesn’t actually increase the amount of money available, or everyone would do it. This is like the old joke about how there can’t be no money in the account-I still have cheques in my cheque book.

            If they have been printing more and more money, why are they still in debt ? If I could do this, I’d be living in a house in Parnell and driving a Jag.

            Reply
        • Kevin

           /  20th January 2016

          Because it’s rubbish.

          China buys massive amounts of bonds from the USA because if China doesn’t China would be flooded with US dollars which would crash the Chinese economy.

          China needs the USA more than the America needs the Chinese. If China stops selling consumer goods to Americans America will just find another market to buy cheap consumer goods from. But if America stops selling bonds to the Chinese government then the China is screwed.

          Reply
          • Blazer

             /  20th January 2016

            if China stops buying U.S bonds the dollar would devalue ….China is a big creditor re the U.S.

            Reply
            • Brown

               /  20th January 2016

              They are both screwed but the US risks more because of its status – one has a debt it cannot collect “nicely” and the other owes money to someone who will collect without being “nice”. It will be very messy and the status quo impasse simply cannot go on for ever. Income tax is at the root of this evil as it allows the populace to be raided at source.

            • kittycatkin

               /  21st January 2016

              Why don’t they just print even more money as Blazer says they are doing, and pay the debts with that ?

  3. The report on this on TVOne News tonight, which acknowledged the 6.8% figure is probably manipulated by the Government to meet Communist Party targets, also said, “There are other factors. Chinese wages have increased, lessening their competitive advantage”.

    “the average annual salary of a worker in China’s private sector was 28,752 yuan (about $4,755) in 2012, or 38% of the global average”.

    http://qz.com/170363/the-average-chinese-private-sector-worker-earns-about-the-same-as-a-cleaner-in-thailand/

    So an “emerging” economy is basically screwed when its wages reach this sort of level?
    Time to move on. Vietnam perhaps? Bunch of peasant countries in the general vicinity.

    Doesn’t bode well for the long-term prospects of workers in the world, does it?
    “We don’t want your products any more, the labour component has just gotten too expensive. They’re still cheap products, sure, only not cheap enough. We can get them cheaper from your neighbour now we’ve moved our HQ there”.

    People don’t say that though, do they?
    They say, “We’re raising the living standards of the poorest people on earth”.
    We’re going to run out of those one day. What do we do then? Pay more for the goods?
    That’ll be terrible won’t it? Imagine paying the real price of goods with a decent, living wage component built into it?

    Oh well, its the New World Order.

    Reply

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