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Is China's 'Real' Economy Crashing?

Tyler Durden's picture





 

As Marc Faber noted, we hardly expect China to report GDP growth rates that do not perfectly fit the goal-seeked solution for utopian society, but under the covers, there appears to be some considerably more ugly real data. One of the hardest to manipulate, manage, or mitigate for a centrally planned economy is Electricity production. The year-over-year drop in China's electricity production is the largest since the slump in Q1 2009; and the seasonal drop (associated with the New Year) is the largest on record at 25.3%! So on one hand China is discussing tightening monetary policy amid inflation anxiety and a potential real estate bubble - thanks to the rest of the world pumping free money - and on the other hand Chinese officials are faced with the reality of a drastically slowing 'real' economy. At the same time, we note that it appears China's export-import data appears overstated. Rock meet hard place.

Biggest seasonal drop ever in China electricity production and worst YoY drop since the crash in 2009...

 

And as Bloomberg notes today:

Widening differences in bilateral trade data reported by China and Hong Kong suggest export-import activity is being overstated by the mainland as companies report inflated figures, according to Mizuho Securities Asia Ltd. The chart below compares China’s data on monthly exports to Hong Kong the past two years, with counterpart figures from the city on imports.  

 

 

China’s numbers were 47 percent higher than Hong Kong’s in January, compared with a 13 percent difference two years earlier. The lower panel shows reports during the same period for China’s overseas shipments to the U.S., using each nation’s official statistics, where the differential has remained more consistent.

 

Exaggerated trade figures would mean that China’s new leaders, who take over the government at the National People’s Congress this week, are failing to get the boost from global demand that the data indicate as they try to sustain a rebound in the world’s second-biggest economy. Hong Kong passed the U.S. in November to become the biggest export market in China data.

 

Exports to Hong Kong from China rose 60.9 percent in the first two months of 2013 from a year earlier, compared with last year’s 20.7 percent gain for the full year. “This seems inconsistent with the pictures of the final demand in both Hong Kong and the countries for Hong Kong re-exporting,”

 

The report (http://images.mofcom.gov.cn/zhs/201301/20130125145056637.pdf) from December 2012 shows that shipments via Hong Kong and other intermediary countries or regions, as well as sales through resellers, account for most of the discrepancy in the nations’ bilateral trade data.

 

Charts: Bloomberg

 


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Fri, 03/15/2013 - 10:02 | Link to Comment BlueStreet
BlueStreet's picture

Just leave the lights on in all the construction manipulated ghost towns, problem fixed.  

Fri, 03/15/2013 - 10:12 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

China's economy isn't crashing, it's gently floating downstream.....like a pig.

Good suggestion to leave the lights on, though, as it makes night fishing for river pig much easier.

Fri, 03/15/2013 - 10:33 | Link to Comment Edward Fiatski
Edward Fiatski's picture

Winning the Future.

Fri, 03/15/2013 - 14:21 | Link to Comment Ying-Yang
Ying-Yang's picture

The pigs are not doing well

Fri, 03/15/2013 - 11:06 | Link to Comment GetZeeGold
GetZeeGold's picture

 

 

The only reason electricity production is down is because they shut off the lights at the ghost cities at night. Made sense...cause no one needed it.

Fri, 03/15/2013 - 10:04 | Link to Comment toys for tits
toys for tits's picture

China sees the destruction caused by the CB's, is accumulating gold like mad, and likes to disrupt the status quo (via hacking among others).

It would probably join ZH if it could.

Fri, 03/15/2013 - 11:57 | Link to Comment ceilidh_trail
ceilidh_trail's picture

Ananonomous is China's official rep. He says cHiNeeze citizenism reports everything just fine like pigs all in their poke.

Fri, 03/15/2013 - 10:13 | Link to Comment firstdivision
firstdivision's picture

US electricity demand is getting quite interesting to say the least.

Fri, 03/15/2013 - 10:19 | Link to Comment Sudden Debt
Sudden Debt's picture

they started using the electric chair for executing again in America?

Fri, 03/15/2013 - 10:19 | Link to Comment Sudden Debt
Sudden Debt's picture
Is China's 'Real' Economy Crashing?

you lost me at real...

Fri, 03/15/2013 - 10:20 | Link to Comment Smegley Wanxalot
Smegley Wanxalot's picture

Currency markets are one big CLUSTERPUMP.

Fri, 03/15/2013 - 10:23 | Link to Comment _ConanTheLibert...
_ConanTheLibertarian_'s picture

or clusterfuck

Fri, 03/15/2013 - 11:32 | Link to Comment Theosebes Goodfellow
Theosebes Goodfellow's picture

...wouldn't that be a flustercluck?

Fri, 03/15/2013 - 10:23 | Link to Comment _ConanTheLibert...
_ConanTheLibertarian_'s picture

Good article ZH, this is actually very disturbing.

Fri, 03/15/2013 - 12:00 | Link to Comment ceilidh_trail
ceilidh_trail's picture

Looks very cyclical to me. It drops every February and every third year it takes a dump about this size by what I see on the chart above. Sometimes I think we look for things that aren't really there- confirmation bias?

Fri, 03/15/2013 - 10:25 | Link to Comment Sudden Debt
Sudden Debt's picture

it's just seasonal adjusted... or not seasonal adjusted... whatever BURN MORE COAL BITCHEZ!!! THE SERVS ARE STARTING THE BREATH AGAIN!!

Fri, 03/15/2013 - 12:06 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

All joking or sarcasm aside, having a ton of coal (literally), along with whatever wood pile makes perfect sense for Prepper/Resilient people, as it makes a great heat source.  If you use Anthracite coal -- and I have -- it burns very clean, and burns hotter and longer than wood.  Plus it's harder (impossible) for a forest fire to burn down your coal pile, compared to your wood pile.  If I had the space and bucks, I'd have a whole train car of coal dumped on my property.  Maybe even use it to make my own power station.

Fri, 03/15/2013 - 10:31 | Link to Comment bugs_
bugs_'s picture

Huangpu

Fri, 03/15/2013 - 12:34 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

?

Fri, 03/15/2013 - 10:33 | Link to Comment orangegeek
orangegeek's picture

Electricity use in China will bounce back.  China is already buying up light bulbs for their empty cities to install. 

 

Lot's of out of work construction workers in China now - so they can walk around and turn the switches on off.

Fri, 03/15/2013 - 10:35 | Link to Comment fijisailor
fijisailor's picture

So the obvious question is:  Is China engaging in some type of energy conservation plan?  This may be all this is.

Fri, 03/15/2013 - 10:46 | Link to Comment Ben Bermonkey
Ben Bermonkey's picture

Tyler you are blind on your bullish eye. If you look at the chart in detail you see a spike in the early months of the year regularly. I think they have some holidays at the time.

Fri, 03/15/2013 - 10:49 | Link to Comment adr
adr's picture

but this drop is far larger than the past few years.

Fri, 03/15/2013 - 10:46 | Link to Comment waterwitch
waterwitch's picture

If electrical output drops below 300, then we may have something to talk about. Looks like a seasonal re-occurrence to me.

Fri, 03/15/2013 - 10:48 | Link to Comment adr
adr's picture

So Hong Kong says it never received 47% of what China shipped, but the USA says it received 20% more than China actually shipped??!!?!!?

I mean it's plausible to claim you shipped 47% more than you actually did, many corporations do this. China is just overproducing inventory or claiming they shipped more than they actually did. Creating fake production numbers to support the goal sleeked government statistics. The numbers in Hong Kong are probably on the money.

The big story is the USA claiming we received 20% more than was actually produced and shipped. Who would claim you received 20% more than what you paid for? Why would China under report shipping to the USA, it doesn't help them. China would be getting ripped off on 20% of what they shipped. The only reason I could see to artificially increase inventory is to fake US import/export statistics. Why would you artificially increase the import statistic? To give the illusion of greater business activity?

The USA is making a claim of 20% more business activity than actually took place.

Fri, 03/15/2013 - 12:06 | Link to Comment tired_of_manipu...
tired_of_manipulation's picture

Import vs. export numbers rarely match globally.  It's been a while since I last checked but worldwide imports typically exceed exports. There is a reason though -- exports are usually only tracked in a vague sense by the exporter, but because imports are typically taxed by the importer they are tracked more closely.  There may also be political reasons to understate your exports like China is doing? FWIW, the US typically understates it's exports too.   

Fri, 03/15/2013 - 11:18 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

As I noted yesterday in another post on China, the contraction is explained by the Chinese adapting to the (lower) orders from the West, in spite of the commie-confetti-money that their FED-led CB's are pumping out.

The Fed & 'Coalition of the Unwilling' are doing massive QE to juice their stock markets and manipulate the masses -- the way the commies did decades ago.

We have seen the enemy, and he is US:  USSA!

Fri, 03/15/2013 - 20:02 | Link to Comment sschu
sschu's picture

tightening monetary policy amid inflation anxiety

 

The primary tool to combat the mercantilist tendencies of China etal is to inflate/devalue your currency.  China has “pegged” its trade currency to the dollar in order to gain significant economic (especially export) advantage.  Yes, the US has other problems, and much of the populace likes cheap goods from China … at least as long as they do not lose their job to $1 / hour assembly serfs in Shanghai. 

The real crime here is that the US leaders have been unable to circumvent what is an untenable position, no floating currency with major positive/negative trade balances ie China/US.  We know historically where this ultimately leads, someone gets hosed either via default or devaluation and this generates animosity/anger which often leads to “depressions” and even war.  Ignorance is not an excuse for those in charge. 

Starting twenty+ years ago Bush1/Clinton/Bush2/Obama should have been in China’s face letting them know that this cannot work in the long run, fix it now.  Let your currency float.  They did not and we have massive unemployment, major trade deficit issues and all that entails.  This was a blunder of historic proportions for which we will all pay dearly. 

Instead we get Greenie and Bennie devaluing our currency to paper over a clearly unworkable circumstance.  We are in the initial phases of the “restructuring” of this unbalance.  With recent history as our guide, our leaders are completely ill-equipped to navigate us through this crisis in anything close to a peaceful manner.  

Events will take us wherever they will, we are no longer in control of our destiny.   

 sschu

 

Fri, 03/15/2013 - 20:55 | Link to Comment J Robert Burgoyne
J Robert Burgoyne's picture

Starting twenty+ years ago Bush1/Clinton/Bush2/Obama should have been in China’s face

Bill Clinton, the pro-labor President, granted China permanent Most Favored Nation trading status, and let China into WTO. Presumably it was in return for money from the multinationals that benefitted Bill/Hillary in some form.

In the 2008 Hillary / Obama primaries, Hillary herself said that the benefits of globailization were unequally distributed - duh! If Bill can do a mea-culpa on DOMA, it seems more appropriate for him to speak up for his error on letting China into WTO.

This was a blunder of historic proportions for which we will all pay dearly.

It wasn't a blunder for Bill Clinton.

Fri, 03/15/2013 - 11:34 | Link to Comment Nehweh Gahnin
Nehweh Gahnin's picture

Pigs tend to muck up the turbines in those hydroelectric dams.

Thu, 03/21/2013 - 08:19 | Link to Comment Stud Duck
Stud Duck's picture

Nehweh, now that is a weel thought out comment!

 

Fri, 03/15/2013 - 11:50 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

I've been saying for weeks and one blogger (who has since disappeared) has been saying for months, that:

The US/Fed and its NWO bosses are at war with Russia and China.  In the case of China, they (NWO Elite) are happy to have them be the place to get things made cheaply, but they are not happy about China getting 'uppity'.  Kinda like your boss is happy to have you perform very well, but not to overtake him.

The Fed is giving China two monetary-fiscal choices:

1. Do QE (like the Fed & its Pals/Coalition) and create inflation, or

2. Raise the value of its currency, relative to the USD, and damage/kill its exports

Either way, they take an economic and employment hit, that will (hopefully!) lead to unrest and political instability.

The US (the #1 currency manipulator in the world) is not about to have the BRIC+ crowd upstage its petrodollar-supremacy and gunboat/bully diplomacy.  At any price.  They will not only manipulate PM prices (from threatening the USD, but will also throw the Euro under the bus (kill the Euro), to keep the USD as the supreme currency.   Because only as the supreme/GRC currency can the Fed print at will, ignore deficits and build its military to control any region of resource-interest in the world.

The only choice China has is indeed Door #1 or #2.  My guess is they have chosen #1 -- to keep their attack on dethroning the USD -- and are adapting to the export hit they are taking. 

As a counter move, I'd fully expect China to use their ample USD reserves to buy up ALL the available gold and silver bullion.  (No need to buy up all the Platinum, as they can get it from Russia.)  In buying up the gold (at depressed prices), they can force a PM crises and, in turn, a currency crisis in the USD. This is America's Achilles Heel:  A coalition of countries anchoring their currency to gold.  If the USD loses its GRC supremacy, gun-boat diplomacy and Foreign Aid (even to Israel) is over.  We will live in a different world.  This it the worst fear of the NOW Elite.

It ain't gonna be pretty for the 'unwashed masses' here or there, but the rich on both/all sides will always do well, while they have the Plebes sweating, bleeding and dying for them.  Savvy?  But feel free to keep digressing and getting wrapped around the axle with low-level issues.

Fri, 03/15/2013 - 13:15 | Link to Comment CTG_Sweden
CTG_Sweden's picture

 

 

Kirk2NCC1701:

 

"The Fed is giving China two monetary-fiscal choices:

 

1. Do QE (like the Fed & its Pals/Coalition) and create inflation, or

 

2. Raise the value of its currency, relative to the USD, and damage/kill its exports

 

Either way, they take an economic and employment hit, that will (hopefully!) lead to unrest and political instability."

 

 

 

My comments:

 

I don´t get it. Why can´t the Chinese instead stimulate increased productivity which enables companies to pay higher wages which in turn means more savings and more investments in increased productivity and/or more domestic consumption in the short term? Remember that Henry Ford late in 1913 could decide to double the pay for his assembly line workers to $5 a day (which meant that pay for 88 days was the equivalent of an entry-level Model T roadster). Productivity can be increased quite rapidly if there are incentives to do so or if far-sighted individuals are in charge of businesses that have a great potential for increased productivity.

 

Perhaps there has been too much incentives to invest in real estate and insufficient incentives to invest in productivity. The question is why the Chinese leaders have not done anything about it (or have they?). Increased productivity can in some cases increase the ability for employers to pay a lot more even in the short term, as in the Ford case in 1913/14. And increased wages should prevent unrest and political instability. So the question is why the Chinese leaders have not prioritized increased productivity more than they have so far?

 

Perhaps China needs incentives that stimulate their leaders to create incentives for increased productivity rather than investments in real estate?

Fri, 03/15/2013 - 20:48 | Link to Comment J Robert Burgoyne
J Robert Burgoyne's picture

Productivity can be increased quite rapidly if there are incentives to do so or if far-sighted individuals are in charge of businesses that have a great potential for increased productivity.

When you find those far-sighted individuals in China, let us know.

Fri, 03/15/2013 - 12:00 | Link to Comment Crabshacker
Crabshacker's picture

one of the BIG crab buyers on the washington coast that I buy live crab from (these guys buy mil. lb of crab a year) sell tons of liive crab to china, was absolutely freaking out because they suddenly quite buying with no future orders. When China buys live crab they are banded and high graded and the boats get top dollars. sometimes over 7.00 a pound. Now all this crab is sitting at the cannery a will have to be moved at half that. He then went on about ghost cities and some one he knew who made mil. building them and the shit storm coming. 

Fri, 03/15/2013 - 12:21 | Link to Comment dirtbagger
dirtbagger's picture

Crab exports are down because Coastal Chinese cities have doubled producting by producing a genetic mutant crab with 16 legs.  Only problem is the crab tastes like a cross between coal ash and formaldyhide.

Fri, 03/15/2013 - 12:16 | Link to Comment ironymonger
ironymonger's picture

It's 'sought,' not 'seeked', numbnuts.

Fri, 03/15/2013 - 12:21 | Link to Comment falak pema
falak pema's picture

if this is true then heads will roll and the new regime will say its the fault of old regime.

A new regime is a good time to do major house cleaning; if the internecine bickering allows it, key unknown in an inbred and obscure system. 

Fri, 03/15/2013 - 13:17 | Link to Comment CTG_Sweden
CTG_Sweden's picture

 

(I posted my reply to Kirk2NCC1701 below/above, so please delete this message.)

Fri, 03/15/2013 - 13:40 | Link to Comment kevinearick
kevinearick's picture

Jobs, Jobs, Jobs

You may not know that the insurance companies divvy up consumers by demographic category. Like every other industry, it’s a monopoly computing itself. Have you ever spent a few minutes listening to Buffet? He tells you straight up that the only business is building the monopoly on the margin. The only difference between the USA and the USSR was the expansion rate of misdirection, the acceleration rate of make-work, courtesy of Hollywood, global advertising, and dc technology.

America, like every other empire before it, is a feudalistic society based upon patronage. The resulting occupations are called jobs, for which the majority is always screaming for more. At the end of the day, however, somebody somewhere has to do some real work to make the system spin, and economic slavery only slows down the empire discharge, until it doesn’t. When was the last time you saw the work ethic being rewarded?

Gavin Newsom is just the latest government whore to tell the rentier REIT, affordable housing, oxymoron, make-work robots on drugs what they want to hear, and he is being promoted accordingly. Yes, they have found someone dumber than Jerry Brown. They always do. Of course GM workers go out to their cars on break and do drugs. Humans don’t compete to watch machines do stupid.

Backlash occurs 1 in a billion times, unless external systems funnel it into a subsystem. The empire is a subsystem; it is not all encompassing. The US middle class and the real global economy is contracting accordingly. After protecting the emperor all these years, the emperor is discarding it for another, same as always. If you want a job, go to where the jobs are. Otherwise make something useful out of all the crap currently being discarded.

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