China Hard Landing: Blame The Smog

Tyler Durden's picture

Earlier this week, we got further evidence of just how quickly China’s economy is slowing down (hard landing anyone?) when the March manufacturing PMI printed in contraction territory, the employment sub index dove to Lehman levels, and rail freight fell 9%. While disconcerting, this isn’t all that surprising given that if one looks at what really matters (i.e electricity usage, rail freight volume, and credit growth), it’s pretty clear that China’s economy isn’t expanding at anywhere near the targeted 7% and hasn’t been for quite some time: 

And the weakness may well persist as PM Li wages “war” on a familiar adversary: smog. Beijing is set to close all major coal power plants by 2016 including an 845-megawatt plant owned by China Huaneng Group. They’ll be replaced by natural gas facilities that will generate two-and-a-half times the power. As Bloomberg reports, this should have a fairly dramatic effect on air quality: 

Shutting all the major coal power plants in the city, equivalent to reducing annual coal use by 9.2 million metric tons, is estimated to cut carbon emissions of about 30 million tons, said Tian Miao, a Beijing-based analyst at North Square Blue Oak Ltd., a London-based research company with a focus on China.

It may also have a noticeable effect on economic output. Here’s Deutsche Bank: 

Almost universal from companies is a lack of understanding of the public reported GDP numbers and a lack of correlation to what they see. Many names see the actual GDP rate in China for the past 3 years as being more like the 5-6% level and that 2015 is likely to be at a similar year. Interestingly most feel that the region’s ability to achieve anything more than this (i.e. 8+%) is severely constrained for the next few years by the much needed pollution control.


Mentioning pollution and corruption in China is not new; however, the sharp increase in state focus on both issues is clear. The slowing of the economy may be the price of fixing these issues…

The costs to China’s sputtering economic growth machine aren’t likely to be small either. In fact, Bloomberg estimates suggest industrial output may have to be slashed by a fifth in order for Beijing to hit its own pollution targets and by up to 40% if China wants its citizens to be able to breathe the same air as the rest of the world: 

How big is the hit? China's government is targeting a PM2.5 level of 35 micrograms per cubic meter. In 2014, the level was about 60. Our estimate suggests that without any changes in industrial structure or other abatement efforts, getting there would require a reduction in industrial output of as much as 20 percent.


Getting down to the international clean air standard would be even tougher. The level recommended by the World Health Organization is 10 micrograms per cubic meter. Absent other measures, that would mean taking China’s industrial output down 40 percent.

*  *  *

So there you have it. Expect the Chinese economy to decelerate further going forward and expect Beijing to blame it on the smog.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NoDebt's picture

Correct me if I'm wrong, but "smog" has little to do with carbon emissions.  "Smog" is more about NOx emission which interact with sunlight and create that nasty yellowish haze you can see over a distance and makes it not-so-fun to breathe.  My knowlege in this area come mostly from my experience in Los Angeles in the early 80s, not because I have any formal training in this area.

Also, cute how the official GDP declines and then flatlines at exactly 7%.  Nice.  

knukles's picture

See.  That's what they get for making all the iCrap that they sell to the Los Angelienos.  Hah!  And they probably thought they'd get off this planet alive.   Dumb fucks. 

Exponere Mendaces's picture

....says the retard that is living in the biggest soon-to-be-desert state in the USA. Yeah, you are a paragon of what China is doing. Maybe dig a well, it will keep you busy and maybe stop you from being online so much, embarassing yourself with your grandpa witticisms.


Manthong's picture

The Siberian Vortex could have something to do with it.

Arnold's picture

ND, particulates, moisture and a lack of prevailing wind are also factors.

Example: Mexico city.

one_hundred's picture
one_hundred (not verified) NoDebt Mar 26, 2015 9:56 PM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

Dead Canary's picture

You can tell China's economy is collapsing. The smog is starting to clear.

Dollarmedes's picture

If there's one thing the history of Communism tells us, it's that they value the environment over production targets. /s

malek's picture

Repeat after him: It's all the Communists' fault.

China isn't really communist anymore you say? Well let's just redefine communism instead of adjusting our views.

Yen Cross's picture

  "U.S. Hard Landing". Blame the weather?

 Tyler is apathetic, when it comes to opinions. ( I repect that)

 Tyler uses < GS, BAC, JPM> material to test you Guys & Gals. Start doing your homework, and quit relying on Zero Hedge for answers.

 Zero Hedge offers information to serious traders that are looking to expand their trading knowledge.

ComplexCat's picture
ComplexCat (not verified) Mar 26, 2015 9:25 PM

Everything fits ZH's rhetoric, or else you won't see it here.

knukles's picture

So try the DNC website with MSNBC for dessert

jamochavez's picture

why are you here- what sort of douchebag goes to a site he does not like and makes comments

Yen Cross's picture

 He's the clown that trolls general consensus just before he BTFATH, thinking he's going to find a fill before the bottom falls out.

83_vf_1100_c's picture

  This will mean iPhone shortages. Good for APL stock?

Aussiekiwi's picture

China will deal with the smog the same way it deals with GDP figures, it will announce what the Smog reduction figure will be and then announce further down the track that it has exactly hit its smog reduction figure, the wonders of central planning.

q99x2's picture

I'm tired of waiting for the collapse already. Won't something ever happen? When are we going to be able to collect bounties on banksters damn it.

SweetDoug's picture




But if the filthy Chinese take a page from the BLS and start seasonally adjusting the smog, everything should be just fine!



Yen Cross's picture

     I like Muppets. My dog likes "dry humping" Muppets. {STUFT ANIMALS}


edotabin's picture

I only pay attention when someone goes on nuclear alert. 


random999's picture

Hahaha no way!

Maybe as an average per year over the entire country it was 60 pm2.5

Big cities like Chongqing, Harbin, Chengdu, Beijing, Xian have been crushing the 500 barrier multiple times last years and the days they're below 60 can probably be counted on your hands.

Would be more interesting with the average daily exposure per citizen!

Kiwi Pete's picture

Great link Random. I see Beijing is 173 Unhealthy today and Chengdu 187 Unhealthy. A long way from 60!

Motasaurus's picture

Bejing is combatting their smog by investing in hundreds of LFTR reactors - the only technology that can replace coal.

Zero emissions, cheap, and almost universally available (the amount of thorium Australia has dug out of the ground during a century of copper mining could power the world at South Korean levels of useage for the next five thousand years).  

Can't make those pesky bombs from it though.  

Kiwi Pete's picture

According to this information from the Helen Caldicott Foundation, the technology for LTFR reactors is still 15 years away, the first feator 50 years away,still produces nearly as much nuclear waste, can still make bombs, still extremely dangerous to produce and has no real benefit over conventional nuclear. 

Source June 2012

Lea's picture

Rabid libertarians can wait for China's collapse. "Well done for these commies, what with that central planning, ha ha ha".

They can wait.

Typing Typer's picture

That's pretty cunning propaganda. Take the two biggest complaints the people have and make the complaints counteract one another. "We MADE the economy go down in order to MAKE the smog go down."

Now the people aren't complaining about smog and the bad economy anymore!!!

Classic Chinese strategy is asking 'how can we use our enemy to make ourselves stronger?', and you can see that in the way they handled these two national problems of the economy and smog.

Most Chinese I think will see this exactly as the excuse that it is, but it's definitely a true to form Chinese statement for the government to make on these matters.

monad's picture

Maybe the goal is to produce global warming by paving over Asia, decimating low Chinese while annihilating the low populations of more vulnerable regions. "Oops! We'd apologize, but there's nobody left. Gotcha suckers!"