Grim Fairy Tale: China’s Economy Grows at 8.1%
On Friday, Beijing’s National Bureau of Statistics announced that the Chinese economy grew 8.1% last quarter, down from 8.9% in the previous period. Q1 growth was the lowest in 11 quarters.
On the day before NBS made its announcement, market chatter pegged growth at 9%, spurring rallies. Yet investors were not the only ones taken by surprise on Friday. Consensus surveys of analysts forecasted 8.3% to 8.5%. The 8.1% figure even came in below recent Chinese government estimates. As late as the third day of this month, Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission, predicted 8.4% growth, citing “initial figures” from “relevant China research institutes.”
But as disappointing as the Q1 number was—and stock markets did not react well to the news—it looks like the 8.1% figure overstates growth, not correlating with the weight of information for the period.
It’s true that the economy improved in March. Industrial value-added output, for instance, was up 11.9% year-on-year. There was a big increase in bank lending, which skyrocketed 15.7%. Exports were stronger than expected, increasing 8.9%, and the trade surplus came in at a robust $5.35 billion.
Nonetheless, the Chinese economy always improves in March, when the drag of the long Lunar New Year holiday wears off. This year, the “March bounce” was weaker than in prior years.
Take industrial value-added output, for instance. Last year in the first quarter, it increased at a faster pace—15.7%—than it did this year, when it rose 11.6%. Even the surprisingly robust semi-official manufacturing purchasing managers’ index, which jumped 2.1 points in March to 53.1, showed a weaker-than-usual rebound. And it is hard to reconcile either of these Beijing-generated numbers with the widely followed HSBC Markit PMI, which tumbled to 48.3 from 49.6, the fifth-straight month of contraction. And in a tell-tale sign, producer prices were down last month.
[how do they do it? - Build ghost cities.]