09 February 2012

Economic Slowdown in China: "Official Numbers vs Reality"

Roubini Interviews Chovanec

Economist Patrick Chovanec, associate professor at Tsinghua University School of Economics and Management in Beijing, offers a revealing look at what is happening under the official facade of government economic statistics, inside China.

There is no doubt that the Chinese government has misled economic analysts with phony numbers. The only question is how badly analysts have been misled, and for how long.

"Mish" Shedlock looks at some of the specific underlying metrics which contradict the official CCP line in a recent article:
Chinese Electricity Consumption Fell Massively In January
Business Insider reports Chinese Electricity Consumption Fell Massively In January, And The Chinese New Year Doesn't Explain It

...China Central Bank Vows Housing Support
In a sure sign that property prices in China are crashing faster than the Chinese government wants, China Central Bank Vows Housing Support

...Too Late to Prevent a Hard Landing

Given the massive size of China's property bubble, it's far too late to prevent a crash landing. The only way to prevent crashes is to not let bubbles get so big in the first place. _Mish
As Chovanec explains in the video above, China's governments -- central and regional -- have committed themselves to a policy of overbuilding a significant overcapacity of fixed assets and production. This course of action was forced on China because of significant economic slowdowns in its main export markets -- Europe and the US. But such a policy is unsustainable in the long run, and eventually the bills for the spree will come due.

When China's economy slows down, a long list of dynamic consequences will be instigated. One of the most important consequences will be a slowdown in global commodities markets. Whether that slowdown will turn into a rout -- as happened in late 2008 and early 2009 -- remains to be seen.

But that possiblity -- and several others -- must be considered, and events must be monitored closely. Remember: Don't accept official economic numbers from governments. Always look at the underlying reality of what is actually happening.

Update 10Feb2012:
China betrayed signs of spluttering domestic demand on Friday as imports crumbling to their lowest in more than two years and weaker-than-forecast bank lending signalled to investors that policymakers would soon make a fresh bid to bolster growth.

...The big imports drop combined with a smaller exports drop left China with a trade surplus of $27.3 billion in January, its biggest in six months and confounding expectations of a further narrowing. _Reuters


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“During times of universal deceit, telling the truth becomes a revolutionary act” _George Orwell

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