The Sum Does Not Equal The Parts: China Provincial GDP Signals Sharper Slowdown

Tyler Durden's picture

First-quarter growth in almost all Chinese provinces was below their annual targets, according to local media, with the most concerning data from resource-dependent and manufacturing-heavy provinces suffered the sharpest economic slowdown in the first quarter as the government pushed to tackle excessive factory capacity and pollution. As Reuters reports, the fastest growth regions are Chongqing, Guizhou and Tianjin and all saw growth drop significantly. Specific provinces affected by the government's reforms include Inner Mongolia, which provides one third of the coal supply in the country, saw GDP growth drop to 7.3% in Q1 from 9.9% a year earlier; Shanxi, a major coal producing province, which saw growth tumble to to only 5.5%; and Hebei province, the nation's top steel producer, collapsed to only 4.2% in the first quarter of 2014 from 8.2% in the previous quarter. It seems the sum of the parts is anything but the same as the whole.

 

As Reuters reports, China's resource-dependent and manufacturing-heavy provinces suffered the sharpest economic slowdown in the first quarter as the government pushed to tackle excessive factory capacity and pollution, official data showed.

First-quarter growth in almost all Chinese provinces was below their annual targets, according to local media.

 

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Growth in China's less developed western and central provinces have consistently outpaced that of more affluent eastern regions in recent years, but the latest data showed the gap is narrowing as the former saw growth slowing more quickly.

However, it's entirely unclear still what the real numbers are...

The combined economic output of China's provinces has long exceeded that of the national level compiled by the National Bureau of Statistics, raising suspicion that some growth-obsessed local officials have cooked the books.

 

Analysts at Bank of America/Merrill Lynch estimated that weighted average of provincial real GDP growth rate in the first quarter was 8 percent, down from 9.5 percent in 2013.

 

Chinese leaders have recently set new standards for local officials, stressing that their performance cannot be simply based on regional growth rates, but should include resource and environmental costs, debt levels and work safety.

So if these are the 'locally' reported data - and they are this bad - just how bad is the growth? And just how bad has it been for years as perhaps this is the normalization to reality that so many China realists have been expecting (and China bulls denying).