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Chinese GDP Beats And Misses - Slowest Growth Since 1990's Tiannanmen Square Sanctions Hit

Tyler Durden's picture




 

China's broad stock indices were flip-flopping between gains and losses from the open (although securities firms continued to get monkey-hammered on more tightening by regulators) heading into the avalanche of data that hit at 2100ET. GDP growth - which was estimated at sub-7% based on real-time hard-date - was released/leaked 10mins early - rising 7.3% YoY in Q4 (just beating expectations of a 7.2% rise) but grew only 1.5% QoQ (missing the 1.7% expectation). Then came Retail Sales - beating by the most since May 2014 with a 11.9% YoY gain (against 11.7% expectations). Industrial Production grew at 7.9% YoY (beating expectations of 7.4% by the most since July 2013). Of course the fact that Chinese GDP growth of 7.4% YoY was the weakest since 1990 was entirely ignored as the immediate reaction was Yuan and Chinese equity strength.

Stocks were flip-flopping...

  • 2025ET *CHINA SHANGHAI COMPOSITE SET TO OPEN DOWN 0.1% TO 3,114.56
  • 2031ET *CHINA SHANGHAI COMPOSITE INDEX RISES 1.1% TO 3,150.10 AT OPEN
  • 2038ET *SHANGHAI COMPOSITE INDEX PARES GAIN TO 0.1%
  • 2041ET *SHANGHAI COMPOSITE INDEX DROPS 0.3% BEFORE GDP DATA
  • 2045ET *SHANGHAI COMPOSITE INDEX FLUCTUATES, RISING 0.2%
  • 2047ET *SHANGHAI COMPOSITE INDEX RISES 0.8% AS PETROCHINA GAINS 2.7%
  • 2054ET *SHANGHAI COMPOSITE INDEX RISES 1%
  • 2058ET *SHANGHAI COMPOSITE INDEX EXTENDS GAINS, RISING 1.4%

And then the data hit...

Chinese economic growth BEAT AND MISSED

  • *CHINA 4Q GDP RISES 7.3% Y/Y: CBN - Beat
  • *CHINA 4Q GDP GROWS 1.5% Q/Q: CHINA BUSINESS NEWS - Miss

BUT...

Chinese economic growth has not fallen below 7.6% since 1990, when it grew 3.8% following international sanctions in the wake of the 1989's Tiannanmen Square massacre.

As The FT reports, The new numbers mark the first time since 1998, when the economy was buffeted by the Asian financial crisis, that growth has slipped below the Communist party’s annual gross domestic product target, which was set at “around” 7.5 per cent for 2014.

The only other year official growth has been below the target since the government began publicly announcing them in 1985 was in 1989.

 

 

As recently as 2010, the Communist party estimated it needed annual growth of at least 8 per cent to avoid job losses and social unrest that could threaten its grip on power.

 

But when it announces its 2015 GDP target in March, the party is expected to lower it to “around 7 per cent”.

 

After a change in methodology last year, the World Bank and International Monetary Fund estimated China’s economy would surpass that of the US in 2014 in terms of purchasing power parity.

Retail Sales beat by the most since May 2014...

 

Industrial Production beat by the most since July 2013...

 

*  *  *

Bloomberg's Tom Orlik noted that their real-time-date tracking estimates of GDP implied a sub-7% growth print...

But don't forget, credit growth re-accelerated in December...

Providing just enough magic fairy juice...

*  *  *

But away from real (or made-up) fundamentals, markets are 'volatile'

Chinese securities firms are getting monkey-hammered again tonight:

  • *CITIC SEC SHARES FALL 9.99% TO 26.66 YUAN IN SHANGHAI
  • *HAITONG SEC. SHARES FALL 9.74% TO 18.71 YUAN IN SHANGHAI
  • *EVERBRIGHT SEC. SHARES FALL 7.56% TO 22.50 YUAN IN SHANGHAI

Following media reports of delays in regulatory approval of margin term extensions:

  • *CHINA MAY DELAY NEW MARGIN TRADING ROLLOVER RULES: SEC. JOURNAL

(in other words - securities firms could not lock in term financing on their margin accounts which implictly means tightening of credit).

In addition, China's first USD-based corporate bankruptcy continues to ripple through markets withe courts freezing assets:

  • *CHINA COURT SAID TO FREEZE 640M YUAN OF KAISA DEPOSITS

Court in northeast China froze 640m yuan of deposits belonging to Kaisa Group Holdings as banks seek loan repayment in two separate lawsuits, say people familiar with the matter.

 

Dalian Intermediate People’s Court, in Liaoning province, froze 540m yuan of Kaisa deposits Jan. 12 as part of lawsuit filed by ICBC, according to the people, who ask not to be identified because order hasn’t been made public

 

Same court ordered 100m yuan frozen Jan. 9 as part of suit against Kaisa by China Everbright Bank, people say

*  *  *

Of course BofA was quick to suggest that the only reason PBOC has not cut the RRR is because stocks have rallied so much... and so now that stocks are falling, they can cut rates...

Following news over the weekend that China's CSRC suspended new margin account openings for three of the nation's largest brokerages and punished another nine brokerages for improper operations on margin financing, China's on-shore A-share markets slumped with SCHCOMP down 7.7% on Monday. Though we believe China's A-share rally since July 2014 was to a large extent justified by rising expectations on reforms and policy easing, we did believe that the rally was too rapid, was overly reliant on enthusiastic retail investors, and that the surge of margin financing was worrisome.

 

We were especially concerned that China's much needed monetary easing is being delayed by the rally as policymakers are afraid that any high-profile easing measures could unduly fuel the rally. With the correction yesterday and possibly in the next couple of days, and with the sharp fall in the PBoC's foreign exchange purchase, we believe the chance of an RRR cut is rapidly rising in the next couple of weeks. 

 

The dark side of China's stock market rally

 

China's A-share market is heavily dominated by retail investors (accounting for more than 80% of transactions), while the average share of margin financing in daily total turnover increased to 16% in December from 15% in November and 11% in January-October 2014. As of last Friday, outstanding margin financing loans were at RMB1.1tn, up from just RMB400bn at the end of July 2014. The A-share surge is surely good for equity financing, as evidenced the rising number of IPOs, but we believe the downside risks should not be ignored: (1) Some credit has been channeled to stock markets for speculations instead of the real economy. The strong total social financing in December could be partially driven by the A-share rally as some entrusted loans might have been used to feed the feverish stock markets via margin financing or other channels (see here). Actually the new CBRC regulations on entrusted loans released last week were aimed at closing this loophole. (2) The rally prevents the PBoC from conducting necessary monetary operations.

Easy as that!! When stocks are up, it is 'justfied'; when stocks are crashing it enables the PBOC to cut RRR which means stocks should go up... Thank the lord for Central planning.

And voila...

  • *CHINEXT INDEX RISES 1.9% IN SHENZHEN, HEADING FOR RECORD CLOSE
  • *SHANGHAI COMPOSITE INDEX EXTENDS GAIN TO 2%

Magic. Good news is good news and bad news is good news.

US equity markets jumped a little (as did gold) but they are fading back a little

 

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Mon, 01/19/2015 - 22:13 | 5682157 q99x2
q99x2's picture

Chinese God Damned Propaganda.

Mon, 01/19/2015 - 22:30 | 5682258 Carpenter1
Carpenter1's picture

Chinese stats...LOL!!

Mon, 01/19/2015 - 22:18 | 5682178 ebworthen
ebworthen's picture

"Hory sheeit!  Rook at de Stock Mawhket!  Qruick!  Rerease de fake data!"

Mon, 01/19/2015 - 22:20 | 5682210 Freebird
Freebird's picture

What do you expect when they all run three sets of books...?

Mon, 01/19/2015 - 22:25 | 5682223 NoDebt
NoDebt's picture

I totally believe those numbers.  Totally.

"Easy as that!! When stocks are up, it is 'justfied'; when stocks are crashing it enables the PBOC to cut RRR which means stocks should go up... Thank the lord for Central planning."

Indeed.  Let us all say a prayer of thanks to the all-knowing, all-seeing, eternally wise central planners.  

You know in the late 1950s one of the fastest growing economies in the world was the Soviet Union.  

Mon, 01/19/2015 - 22:25 | 5682226 Bill of Rights
Bill of Rights's picture

Off in the distance you can hear hundreds of BLS employes laughing their collective asses off .

Mon, 01/19/2015 - 22:27 | 5682242 NoDebt
NoDebt's picture

That's sobbing, not laughing.  Chinese data manipulation Kung Fu is much stronger than ours.

Mon, 01/19/2015 - 22:52 | 5682375 The Shape
The Shape's picture

Chinese numbers are rigged, but they can't even rig them to hit their projections.

I can't keep up.

I have learned that DOD propaganda is still working. Chris Kyle killed 160 people in their own country so Michael Moore could be free to eat doritos in Merica.

 

Tue, 01/20/2015 - 06:59 | 5683043 Vylahkinnen
Vylahkinnen's picture

Well, Iraq is today a free and democratic country, son. We liberated them from oppression and a terrible dictator. Chris Kyle saved a lot of American lives out there. Is that not important to you? And may I ask why? Do you wish harm on your fellow American? Do you hate your country? Are you a foreign agent? Do you work for the Soviets?

Nah, just joking. I really don't care that much. Americans certainly did not save my ass. Not even in WWII.

I am bit disappointed though. I mean - America has had so many wars and that's still considered to be their best sniper? With all that training, equipment and whatnot. No offense, but that's not very exceptional at all. Even with 255 kills. They definitely need to improve on these kill stats. Maybe inflate them a little. Moar kills. Bigger Hero. Moar Money. Just Moar of everything. And a legend was born...

Mon, 01/19/2015 - 23:01 | 5682404 walküre
walküre's picture

Should be pretty evident that when a nation built dozens of entire ghost cities and then suddenly stops doing that, the demand for all commodities related to the building sector are going to fall off a cliff.

No other economy or industry could pick up this massive supply glut that was created for years as a result of the superficial demand from China.

I don't give a shit about their vodoo economics and central planning. They all cook with water and they all steal, lie and cheat. Not only the Chinese.

Unless they keep pumping dozens of buildings out of the ground in the middle of fucking nowhere, this global economy is TOAST.

Chinese can prove their growth by loading up on copper. I dare them.

Mon, 01/19/2015 - 23:23 | 5682490 starman
starman's picture

Bull chit!

Mon, 01/19/2015 - 23:31 | 5682512 Soul Glow
Soul Glow's picture

China never lies about there data.  The US lies, Europe lies, but China never lies.

Mon, 01/19/2015 - 23:36 | 5682528 RagnarDanneskjold
RagnarDanneskjold's picture
The recovery in home sales has faded away, with sales in the latest week down 70% from the rate seen at the end of 2014. Beijing New Home Sales Collapse
Tue, 01/20/2015 - 00:26 | 5682651 disabledvet
disabledvet's picture

Could get a "three Kingdom split" again (Northeast, Being, Shanghai).

 

I don't trust the yuan either.

 

If the euro tanks you will see total mayhem in the non dollar denominated world.

Tue, 01/20/2015 - 00:29 | 5682660 RagnarDanneskjold
RagnarDanneskjold's picture

Chinese Real Estate Investment Contracts in December 

RE investment never contracted during the financial crisis, but it just did in December.

Based on the latest GDP report and an IMF model of the Chinese economy, if the December rate continued, 1Q GDP would be 5.9%. 

Tue, 01/20/2015 - 01:21 | 5682748 Caviar Emptor
Caviar Emptor's picture

The global system can't take a slower Chinese AND American consumer. Shop dang it, Shop!

Tue, 01/20/2015 - 10:04 | 5683357 orangegeek
orangegeek's picture

7.4% growth YoY - lying communist cockroaches.

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