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Another confirmation of Chinese not-so-miracle growth

Vitaliy Katsenelson's picture




 

Electricity was not the only economic statistic not controlled / calculated by the Chinese government that showed that the 6% plus GDP growth in the first six months of 2009 (at a time when the global economy was sliding off the cliff) was an accounting miracle.  

Guangshen Railway announced its results a few days ago for the first six months of 2009: “tonnage of freight transported by the Company amounted to 26.5406 million tonnes (2008 interim: 34.5508 million tonnes).” – a decline of 23%.

Vitaliy N. Katsenelson, CFA, is a portfolio manager/director of research at Investment Management Associates in Denver, Colo.  He is the author of "Active Value Investing: Making Money in Range-Bound Markets" (Wiley 2007).  To receive Vitaliy's future articles my email, click here.

 

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Tue, 09/01/2009 - 16:34 | 55420 digalert
digalert's picture

Who can cook a better #'s book?

A. China

B. USA

C. Mexico

Tue, 09/01/2009 - 06:13 | 54862 chinaguy
chinaguy's picture

Guys, you can't believe ANY statistic that comes out of China. NO Chinese businessman would make a critical decision based on numbers from Beijing or any supposed source like a state or private run company. That's just the lay of the land.

The middle class and the rich (the only ones in China who can make public announcements) have all been co-opted. They are all members of the Party (you can't advance in business if you are not) and they know you can lose your nice apartment and your Audi TT if you do not play ball. This specifically means you DO NOT make any sort of statements that are contrary to the Party line.

Ask any successful Chinese business man if he is a member of the Party or not. He might hem & haw, but, "yes of course I am, you must be".......

The analysts who try to draw some sort of conclusion that, well "electricity usage and rail freights are this, therefore Chinese GPD must be that" are just jerking off. NONE of these figures are accurate. 

You think, well, the numbers are cooked here and China is "different" so the numbers must be cooked to some greater percentage there. Well, you folks don't know from different. You have no idea how "different" China is and how common place (and commonly accepted) what we would call "lying" is there.

No accurate statistics - None

 

 

 

 

 

 

 

 

Tue, 09/01/2009 - 02:53 | 54823 Anonymous
Anonymous's picture

Great post JR, the whole world worships China for it´s rapid economic growth, while we forget that their industrial revolution is very different in character than that of north america and western europe. I mean the industrial revolution in the west was fueled by an endlees stream of innovations starting with the steam enginge. Chinese growth is fueled by cheap money, cheap labor and the drive of multinationals to enter a huge market. China has opened up to benefit from the innovations made in the west, but it isn´t contributing anything beyond cheap labor and the promise that companies can grow there for a long time to come. Capitalism without individual freedom is no capitalism, it is feudalism.

Tue, 09/01/2009 - 01:40 | 54808 Anonymous
Anonymous's picture

China does not matter. This empty bubble will burst and nothing will be left of that garbage country. They don't innovate anything. They're just a sweat shop. It's discusting. They have 1.3B+ people living there and their economy is 1/4 of US and people keep saying China's coming up. They had the same GDP 200 years ago. These people do not create anything. They just take orders from other countries and love you long time. Cheers

Mon, 08/31/2009 - 23:39 | 54746 Anonymous
Anonymous's picture

I have written a blog about how statistics in Asia is collected, you may find this interesting and amusing

http://www.systomatics.info/?p=43

Mon, 08/31/2009 - 23:14 | 54735 JR
JR's picture

The point is that the majority of U.S. economists, Globalists and media repeat ad nauseum that China is going to be the engine that pulls the world economy. God love ‘em, they even believed Stalin’s Five Year Plans. They want Americans to believe this so the Globalists can continue to dismantle and offshore America.

That’s why Ben Bernanke is frantically pulling out all financial stops to prime the U.S. credit pump. It’s to rejuvenate profligate spending in the U.S. in order to recycle and sustain the huge profits transnational corporations are making from goods produced by cheap foreign labor and unloaded to be sold without hindrance in the U.S.—a nation deliberately stripped of its manufacturing base and now the major dumping ground for the global economy.

So when it comes to the real truth regarding China, as Vitaliy Katsenelson reports here, it IS news.  I am reposting my comments from Katsenelson’s last post because I think they bear repeating..

____________________________________________

It is extraordinary that no one ever distinguishes between capitalism and communism, or that it was the offshoring of America to China as she opened her communist doors to Western capitalism that enabled industrial growth in that nation.   Nor is it told of the Globalists’ plans to give away U.S. patents, or the fact that by 2006, the U.S. Patent Office had placed 1,271,000 patent applications on the internet, creating a gold mine for China to steal U.S. innovations and get to market quickly.  Have we grown so blind to freedom that we no longer can price its value?

Globalism closed manufacturing in the USA.  Globalism made a pact with the Red Chinese without insisting on democracy for her people. 

Because of globalism, Chinese pirates sitting at their computers roaming the internet and stealing the details of U.S. inventions that the U.S. Patent Office loads online became China’s R&D program.  Such pseudo capitalism  can never give the spring to invention that our Founding Fathers gave to America when they included  in the United States Constitution  a provision “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

This right of inventors is uniquely American and from it America reaped the spectacular results which are being unloaded from her shores.  In 1997, a study of the inventors honored in the National Inventors Hall of Fame in Akron, Ohio, revealed that 91% of the world’s greatest inventors worked in America and only 9% in other countries.  All this because of America’s superior patent system which gave men the incentive to burn the midnight oil for a chance to own a property right in their own invention.  That is the fountainhead of America’s progress.

As Robert Ringer said in 1979, “The reality is that the communist has been allowed the luxury of keeping his collectivist cake, while eating off the fruits of capitalism.” 

Our country entered into a shameful political partnership with a regime in China that has killed upwards of 65 million people and holds 1.3 billion in bondage.  The price of globalism is high, both for Americans and for the Chinese people who seek a safe place for democracy..

The internationalist bankers at the FedRes financed the sell off of America.  It is time for America to sell off the Fed

Mon, 08/31/2009 - 21:17 | 54680 e1even1
e1even1's picture

i agree that china matters alot.

creative accounting is part of the bubble blowing business. and though China is participating in that, the economy they're busy resurrecting isn't a complete fabrication (consumer vs. productivity) like the US.

watch china rise above this world wreckage. way above it. start thinking about how you'll adjust to being #3 or #4.

Mon, 08/31/2009 - 19:52 | 54626 Bubby BankenStein
Bubby BankenStein's picture

Another measure falling in the range of 20 - 30%.

Direct measures of economic activity do not support the macro government numbers.

Trade what you can, but the more honest measures seem consistently contrary to recovery.

Mon, 08/31/2009 - 19:42 | 54621 Anonymous
Anonymous's picture

http://www.stats.gov.cn/english/

a little dated but the office Chinese source!

Many major state and vital public companies have recently provided long term contract supply of electricity of the grid.

heres an example;
Chinese authorities have announced to pilot the way of direct power supply for 15 domestic electrolytic aluminum firms who can buy electricity directly from power plants.

Analysts point out that direct power supply would help electrolytic aluminum enterprises reduce production cost and improve their competitiveness on the international market. However, as the demand from downstream sectors is still weak, the aluminum price may follow the cost to go downward without the government's reserves, the analysts add.

More electrolytic aluminum enterprises will be covered in the new policy since they are large electricity consumers, according to China Non-ferrous Metals Industry Association.

The policy targets the industry's leading companies including five subsidiaries of Chinalco.

subsidy below the TWO radar.

Mon, 08/31/2009 - 19:32 | 54612 straightershooter
straightershooter's picture

Man, you never heard the "cash for electricity" program? The less you use, the more rebate you got.....

China is the world's largest misery bulb producer. The new new misery bulb uses only 16% electricity compared to the old one. Repeat that 1.3 billion time and the electricity is down, way down. 

Mon, 08/31/2009 - 19:06 | 54585 Anonymous
Anonymous's picture

Well, Australia exports by volume (by my back of the envelope calculations) are down 29%.

AWESOME!

Mon, 08/31/2009 - 18:29 | 54533 Anonymous
Anonymous's picture

Ohhhh... a Chinese conspiracy theory! You mean a quasi-communist centrally planned economy manages its numbers? You don't say.

Wait... you mean they "paint to tape" to make econ stats look better? HMMMM. Sounds familiar. I've seem some of that stuff out of the BLS.

Furthermore, what's the trade here? Short China? Good luck with that. The rub is that even if their economy is in the dumps too, they have $2T in foreign reserves they have saved up for a rainy day so they can spend their way out of it.

US, on the other hand. We're up to our eyeballs in debt. GULP.

Tue, 09/01/2009 - 11:49 | 55029 Anonymous
Anonymous's picture

It is quite common for Chinese
companies to report two times truthful earnings....so I
view the current p/e ratio as about 55:)
It's basically a dotcom...they can go
from seemingly healthy to tits up in a
heartbeat, so no one should have
money in China if they cannot afford to
lose it.

Mon, 08/31/2009 - 18:25 | 54519 Anonymous
Anonymous's picture

Vitaly --

The Chinese government makes up/manageS statistics.
Hmmm -- NEWS FLASH!!!

The U.S. government makes up/manages statistics TOO.

Here's the rub: China now has all our money. More than $1T at last count. And we're in debt up to our eyebealls.

Furthermore... China can manage/manipulate their numbers to no end because they hae a centrally managed government, and they have $2T in resrves in the bank. Whereas, we are a democracy that will get called to the carpet... and we have $50T+ in debt.

So who's better off? And what's the trade based on your "research." are you going to go and short China now? good luck with that trade.

Mon, 08/31/2009 - 19:37 | 54619 Vitaliy Katsenelson
Vitaliy Katsenelson's picture

 

So what?  Who cares what is going on in China?”  If the Chinese economy was the size of the Vietnamese economy, and it was not responsible for more than 2/3 of our trade deficit and didnt hold $2.2 trillion in foreign reserves (about half of which is in US dollars), Id be spending a lot less time thinking and writing about it.  However, what happens in China in the near future will have a significant impact on the world, and more importantly our own economy: it will impact interest rates, the dollar, commodities, and demand for industrial goods; and there will be geopolitical consequences.  China matters a lot! 

Tue, 09/01/2009 - 00:25 | 54777 Anonymous
Anonymous's picture

Who are you quoting? Does anyone think China doesn't matter?

Mon, 08/31/2009 - 22:15 | 54704 Anonymous
Anonymous's picture

Kitayeskiy imina: "Vsun Huy V'chai" "Vin Suhim"

Mon, 08/31/2009 - 17:55 | 54480 Hephasteus
Hephasteus's picture

The chinese don't "sell" elecricity like we do. They just look at how many people live in the house and estimate and send them monthly bill. In america we put false meters on some of the houses and pretend our grid is more efficient than it really is.

Tue, 09/01/2009 - 02:00 | 54813 The Invisible H...
The Invisible Handjob's picture

yeah right... another micrograin of truth used to generate some sweeping spurious falsehood. got any bogus microtrends for us too? what, your Granny knows somebody who bought an iPhone therefore all senior citizens are on the iPhone bandwagon? many many many residential buildings in China are metered as are virtually all industrial/commercial. certainly anything either 1. recently constructed, or 2. recently wired, which categories encompasses a huge portion of the base. my apartment service in Shanghai is as metered and billed as anything I've had in the U.S. I get a precise bill every month and can check the meter reading should I give a hairy sh1t. nothing to do with 'estimated household'. OK yeah I'm sure that might still be true in some ghettos and backwater micro-villages which still operate as semi-communes with shared plumbing and utilities, but the vast majority of service is used in the major cities and in industrial settings, so the idea that 'The Chinese Don't Meter Electricity' is completely bogus. and as somebody points out - even if they dint, they know what they produce. doesn't mean they don't lie about it... but somebody has the number.

Tue, 09/01/2009 - 04:15 | 54842 Hephasteus
Hephasteus's picture

I'm not trying to deceive anyone. I'm saying our numbers are just as supsect as thier numbers. What if 1000 people are laid off in the US and instead of using company electricity that is tweaked and powerfactor corrected to read true they are at home using electricity on a false meter with the motor spinning it hammered down. Not much drop in electrical usage but tons of drop in economic actiivity.

No i wasn't claming that all of china was un metered. I was simply saying that corruption is going to either be completely centralized in china or it could be coming from you don't know where in America.

Tue, 09/01/2009 - 01:58 | 54811 Anonymous
Anonymous's picture

yeah right... another micrograin of truth used to generate some sweeping spurious falsehood. got any bogus microtrends for us too? what, your Granny knows somebody who bought an iPhone therefore all senior citizens are on the iPhone bandwagon?

many many many residential buildings in China are metered as are virtually all industrial/commercial. certainly anything either 1. recently constructed, or 2. recently wired, which categories encompasses a huge portion of the base.

my apartment service in Shanghai is as metered and billed as anything I've had in the U.S. I get a precise bill every month and can check the meter reading should I give a hairy sh1t. nothing to do with 'estimated household'. OK yeah I'm sure that might still be true in some ghettos and backwater micro-villages which still operate as semi-communes with shared plumbing and utilities, but the vast majority of service is used in the major cities and in industrial settings, so the idea that 'The Chinese Don't Meter Electricity' is completely bogus.

and as somebody points out - even if they dint, they know what they produce. doesn't mean they don't lie about it... but somebody has the number.

Mon, 08/31/2009 - 19:13 | 54593 Anonymous
Anonymous's picture

That makes no sense. Are you saying there might instead be estimating 6% fewer people in households? The power company knows it's aggregate demand, even if individual households don't have meters.

Mon, 08/31/2009 - 21:12 | 54678 Hephasteus
Hephasteus's picture

No i'm saying that that's exactly what you are going to get is an aggregate demand number. Our numbers may aggregate with false reading stuck here and there. So if china lies about electricity usage then it comes straigth from the centralized government. If we lie about electrical usage it could be comeing from subdivisions of huge power companies that operate in 10 states but tend to use the same methodologies at each state under thier control.

Mon, 08/31/2009 - 23:35 | 54743 Assetman
Assetman's picture

Oh... that makes me feel better.

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