This morning brings us up to date on what has been a theme for a little while now as we have observed one of the main engines of world economic growth starting to miss a beat or two. This from Bloomberg gives us some context and perspective.
China accounted for more than 36% of global GDP growth in 2016.
That sort of growth has led to this according to the Spectator Index.
China’s GDP as a share of US GDP. (nominal) 2009: 35.4% 2019: 65.8%
This has led to all sorts of forecasts around China overtaking the US in terms of total size of its economy with of course the same old problem so familiar of simply projecting the past into the future. Let us know switch to the official view published this morning.
In 2018, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as the core, all regions and departments implemented the decisions and arrangements made by the CPC Central Committee and the State Council, adhered to the general working guideline of making progress while maintaining stability, committed to the new development philosophy, promoted high quality development, focused on the supply-side structural reform, stayed united and overcame difficulties.
And I thought I sometimes composed long sentences! It also provokes a wry smile if we convert that to the country where we are in as I mull Theresa May telling the UK we “stayed united and overcame difficulties.”
Gross Domestic Product
Firstly we are told a version of tractor production being on target.
According to the preliminary estimation, the gross domestic product (GDP) of China was 90,030.9 billion yuan in 2018, an increase of 6.6 percent at comparable prices over the previous year, achieving the set target of around 6.5 percent growth for the year.
But then we get a version of slip-sliding away.
Specifically, the year-on-year growth of GDP was 6.8 percent for the first quarter, 6.7 percent for the second quarter, 6.5 percent for the third quarter, and 6.4 percent for the fourth quarter.
The trend is exactly as we have been expecting. Also let us take a moment to note how extraordinary it is that a nation as described below can produce its economic output data in only 21 days. There’s mud in the eye of the western capitalist imperialists.
By the end of 2018, the total population of mainland China was 1,395.38 million an increase of 5.30 million over that at the end of 2017.
That brings us to a clear problem which is that we can I think have confidence in the GDP trend but not in the outright number. Not everyone seems to believe that as many have repeated this sort of line.
According to just-released official statistics,
#China‘s #economy grew 6.6% in 2018. While it’s the lowest annual #GDP annual expansion in almost 30 years, it still is quite a robust rate for an #economy that faced — and is facing — several internal and external uncertainties.
That was Mohammed El-Erian of Allianz.
Perspective is provided as I note that 6.2% growth is described as “slow but stable” and we remain on message with this.
the value added of the state holding enterprises was up by 6.2 percent……. and enterprises funded by foreign investors or investors from Hong Kong, Macao and Taiwan, up by 4.8 percent.
A clear superiority of the state over foreign private investors and especially the pesky Taiwanese. But they cannot hide this.
In December, the total value added of the industrial enterprises above the designated size was up by 5.7 percent year-on-year, 0.3 percentage point higher than that of last month, or up by 0.54 percent month-on-month.
We are told about the monthly improvement which is welcome but it is still below the average.
The real growth of the total value added of the industrial enterprises above the designated size in 2018 was 6.2 percent, with slow yet stable growth.
So with 6.2% being slow and stable if 5.7% just slow? Many countries would love such a rate of growth but not China.
Again we see a monthly rise being reported.
In December, the Index of Services Production was up by 7.3 percent year-on-year, 0.1 percentage point higher than that of last month.
However this is also against a backdrop of a weakening over the full year.
In 2018, the Index of Services Production increased by 7.7 percent over that of last year, maintained comparatively rapid growth.
That theme continues as we note that year on year growth was 8.3% in December of 2017.
We find ourselves in familiar territory.
In 2018, the total retail sales of consumer goods reached 38,098.7 billion yuan, up by 9.0 percent over last year which kept fast growth……..In December, the growth of total retail sales of consumer goods was 8.2 percent year-on-year, or 0.55 percent month-on-month.
If we look back the reported growth rate in December 2017 was 10.2%.
This has been an area that has fueled growth in China but Reuters now have their doubts about it.
Real estate investment, which mainly focuses on the residential sector but includes commercial and office space, rose 8.2 percent in December from a year earlier, down from 9.3 percent in November, according to Reuters calculations based on data released by National Bureau of Statistics (NBS) on Monday.
That was just ahead of the slowest pace of growth last year at 7.7 percent recorded for October.
So the two lowest numbers were at the end of the year and compare to this.
For the full year, property investment increased 9.5 percent from the year-earlier period, down from 9.7 percent in January-November.
I note that in the official data whilst prices are still rising volume growth has slowed to a crawl in Chinese terms.
The floor space of commercial buildings sold was 1,716.54 million square meters, up by 1.3 percent. Specifically, the floor space of residential buildings sold was up by 2.2 percent. The total sales of commercial buildings were 14,997.3 billion yuan, up by 12.2 percent, among which the sales of residential buildings were up by 14.7 percent.
This was a factor in things slowing down as we note the faster import growth over 2018 as a whole.
The total value of exports was 16,417.7 billion yuan, up by 7.1 percent; the total value of imports was 14,087.4 billion yuan, up by 12.9 percent.
Those who consider the trade surplus to be one of the world’s economic imbalances should echo the official line.
the Trade Structure Continued to Optimize
So we find that the official data is catching up with our view of an economic slow down in China. Those late to the party have the inconvenience of December showing some data a little better on a monthly basis but the trend remains clear. Looking ahead then even the official business survey shows a decline because the 54s and 53s were replaced by 52.6 in December.
However if we switch to my favourite short-term indicator which is narrow money we see that the economic brakes are still on. The M1 money supply statistics show us that growth was a mere 1.5% over 2018 which is a lot lower than the other economic numbers coming out of China and meaning that we can expect more slowing in the early part of 2019. No wonder we have seen some policy easing and I would not be surprised if there was more of it.
Still it is not all bad news as it has been a while since there has been so little publicity about the annual shindig in Davos. Perhaps someone has spotted that flying to an Alpine resort to lecture others about climate change has more than a whiff of hypocrisy about it.
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