China’s GDP grows but at what price?

by Shaun Richards

This morning has brought us up to date on the official view on the Chinese economy. They put one over on the western capitalist imperialists by producing their economic output numbers so quickly, or at least they think they do. So here is the National Bureau of Statistics.

According to preliminary estimates, the gross domestic product (GDP) was 101,598.6 billion yuan in 2020, an increase of 2.3 percent over last year at comparable prices. The year-on-year GDP for the first quarter went down by 6.8 percent, up by 3.2 percent for the second quarter, 4.9 percent for the third quarter and 6.5 percent for the fourth quarter.

We see that the pattern for China is different due to the rest of the world initially as a result of the Covid-19 pandemic starting in Wuhan meaning its economy was hit hard this time last year. Also it has not recorded any subsequent dips such as the one in November in the UK which we looked at only on Friday. It has been singing along with Jackie Wilson ever since.

You know your love (your love keeps lifting me)
Keep on lifting (love keeps lifting me)
Higher (lifting me)
Higher and higher (higher)

We are told that this excellent result is due to this.

the strong leadership of the Central Committee of the Communist Party of China with Comrade Xi Jinping as the core………and the main goals and tasks of economic and social development were accomplished better than expectation.

The Detail

It opens with a positive reference to a troubled area.

The Grain Output Reached Another High and Production of Pigs Sustained a Fast Recovery.

Later we get some more detail.

 At the end of 2020, pigs and breeding sows registered in stock were up by 31.0 percent and 35.1 percent respectively over that at the end of 2019.

But I also note this.

and pork, 41.13 million tons, down by 3.3 percent.

There was a surge in demand for US pork which faded a bit in November according to National Hog Farmer.

November exports to China/Hong Kong were 3% below the previous year’s large volume at 83,396 mt and fell 5% in value to $193.8 million. However, through November, exports to the region were still up 72% at 955,008 mt and value was up 85% at $2.18 billion.

Also if we come more up to date the Chinese strategic pork reserve – the existence of which is revealing in itself-  has been deployed this month.

BEIJING, Jan 12 (Reuters) – China will sell 30,000 tonnes of frozen pork from its state reserves on Jan. 15, according to a notice published by the China Merchandise Reserve Management Center on Tuesday.

China has released several batches of pork from its reserves in the past weeks to boost supply ahead of a jump in consumption over the approaching Lunar New Year holiday in February. ( Nasdaq)

The African Swine Fever issue has not gone away and there are more than a few who doubt the Chinese claims. There also seem to be issues across other meats as the demand for protein switches.

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Industrial Production

This was solid overall.

The total value added of industrial enterprises above the designated size increased by 2.8 percent over last year.

Also we are guided towards high-tech manufacturing.

manufacturing up by 3.4 percent……….The value added of the high-tech manufacturing and equipment manufacturing went  up by 7.1 percent and 6.6 percent respectively over last year, or 4.3 percentage points and 3.8 percentage points higher than that of the industrial enterprises above the designated size. Specifically, the production of industrial robots, new energy vehicles, integrated circuits and micro computer equipment grew by 19.1 percent, 17.3 percent, 16.2 percent and 12.7 percent year on year respectively.

Services

We start with a familiar pattern of services being the hardest hit area.

In 2020, the Index of Services Production was the same as that of last year.

That is much better than elsewhere presumably because some areas surged.

The value added of the information transmission, software and information technology services and that of financial services grew by 16.9 percent and 7.0 percent year on year respectively, 14.8 percentage points and 4.9 percentage points higher than that of the tertiary industry.

Therefore somewhere must have shrunk, but there is no mention of this in the official release.

Trade Grows Too

As you can see apparently there has been quite a triumph here.

In 2020, the total value of imports and exports of goods was 32,155.7 billion yuan, an increase of 1.9 percent over last year. The total value of exports was 17,932.6 billion yuan, up by 4.0 percent; the total value of imports was 14,223.1 billion yuan, down by 0.7 percent. The trade balance was 3,709.6 billion yuan in surplus.

Indeed as the year progressed things got even better.

In December, the total value of imports and exports of goods was 3,200.5 billion yuan, up by 5.9 percent year on year. Specifically, the total value of exports was 1,858.7 billion yuan, up by 10.9 percent; the total value of imports was 1,341.9 billion yuan, down by 0.2 percent. The trade balance was 516.8 billion yuan in surplus.

The one area that you might have thought would have expanded ( PPE) does not get a mention. So we are left wondering what is being exported and to whom?

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Comment

I have doubts about what the numbers are really telling us and they are driven mostly by this.

In 2020, the total retail sales of consumer goods reached 39,198.1 billion yuan, down by 3.9 percent over last year.

So in an economy growing by 2.3% we saw retail sales fall by 3.9%? Indeed that sort of pattern continued as 2020 progressed.

In the fourth quarter, the total retail sales of consumer goods grew by 4.6 percent year on year, 3.7 percentage points higher than that in the third quarter. In December, the total retail sales of consumer goods grew by 4.6 percent year on year, or 1.24 percent month on month.

So economic growth of 6.5% exceeded retail sales growth by 1.9% in the fourth quarter and I note that December showed no improvement. At this stage China is the doppelganger of the UK as we have retail sales growth but a shrunken economy. However there is one area where we are alike.

Specifically, the investment in infrastructure was up by 0.9 percent, manufacturing down by 2.2 percent and real estate development up by 7.0 percent. The floor space of commercial buildings sold reached 1,760.86 million square meters, up by 2.6 percent. The total sales of commercial buildings were 17,361.3 billion yuan, up by 8.7 percent.

If we return to the issue of consumption I also note this warning from the trade figures we looked at earlier.

 the total value of imports was 14,223.1 billion yuan, down by 0.7 percent.  (for 2020)……..the total value of imports was 1,341.9 billion yuan, down by 0.2 percent. ( for December)

So the economy grew but imports fell? Putting it another way China has managed to increase recorded GDP but at the cost of apparently making its citizen worse off.

Also one of the credit crunch issues was the trade surplus of China which we have just been told has got even bigger.

The Chinese way
Who knows what they know
The Chinese legend grows ( Level 42)

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