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China's True Economic Growth Rate: 1.6%

Tyler Durden's picture




 

While the world gasped last night when China's production-based, and goalseeked GDP number came in at 7.0% - the lowest in 6 years...

 

... the truly scary numbers were in the details, which revealed unprecedented deterioration. The key among these were shown previously, and are as follows:

Plunging consumer sentiment: oddly this hasn't been offset by China's unprecedented stock bubble.

 

The worst retail sales in 9 years:

 

Tumbling auto sales:

 

The weakest fixed asset investment (recall that in China capex spending accounts for over half of GDP growth) in the 21st century

 

Industrial production worse since the Lehman crisis:

 

And of course, home prices:

 

Which brings us back to China's "7.0%" GDP. Because as Cornerstone Macro reports, "Our China Real Economic Activity Index Slowed To Just 1.6% YY In 1Q."

The indicator in question looks at many of the components shown above, such as retail sales, car sales, rail freight, industrial production, and several others, to determine an accurate indicator of the true state of China's economy.

It finds that not only is China's economic growth rate not rising at a 7.0% Y/Y rate, but is in fact the lowest it has been in modern history!

And a 1.6% growth rate by what was formerly the world's most rapidly growing (and largest according to the IMF) economy explains perfectly what happened with the US economy over the past 6 months. Hint: it has nothing to do with the winter, and everything to do with China hard landing into a brick wall.

* * *

Ok, so China's economy is cratering yet its stock market is the best performing in 2015 in dollar terms (Russia may be the only exception). How does one reconcile these two seemingly incompatible concepts?

The answer is simple, and GaveKal's note today, titled Slumping Growth, Booming Market, touches on it.

The equity market’s performance has been driven mostly by the government’s policy response, rather than by the economic data. While economic growth has continued to weaken, Chinese stock markets have enjoyed the biggest rally since 2007, with a huge run-up in the domestic A-share market, which has now spilled over to Hong Kong. The flows last week were especially heavy, forcing the Hong Kong Monetary Authority to intervene in the currency market to offset huge capital inflows—despite a big gain in the US dollar. A strong US dollar usually means a weak Hong Kong stock market, but the relationship has broken down because this time Chinese funds, rather than global investors, are driving the bull run.

Actually it's much simpler than all that. As we explained over a month ago, "QE In China Is Now Inevitable." The Pavolovian algos are merely frontrunning it.

Which, incidentally is good news. Because once China also goes all in, and nobody else is left, then the real fun begins.

 

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Wed, 04/15/2015 - 20:37 | 5997059 wendigo
wendigo's picture

If everyone's fucked, I'd much rather be in the US than China when TSHTF. Less people here, plus I can be armed. But then, everyone else is armed too, so it's not too much of an advantage. 

Sigh. Well, I hope for the best. 

Wed, 04/15/2015 - 20:46 | 5997077 Stormtrooper
Stormtrooper's picture

Most American sheeples are not intelligent enough to be truly "armed".  They might have a shotgun or rifle and 50 rounds of ammo for that annual hunt but they won't survive that first firefight.

If you are really prepared, you are ahead of 98% of your potential adversaries so just keep training and your chances of survival are high.

Wed, 04/15/2015 - 22:17 | 5997316 sun tzu
sun tzu's picture

I have 2000 rounds. About enough for a week if I survive

Thu, 04/16/2015 - 00:19 | 5997649 TruthInSunshine
TruthInSunshine's picture

I told you all that we're already in a global economic contraction, that they've been fudging the numbers, swapping nominal for real metrics, vastly understating debt reloading (by corporations, consumers & governments, which essentially pulls future consumption forward), and pumping out a record amount of fiat confetti which has flowed into many asset classes in a wave of gross malinvestment (unrealized & illiquid at that) that will cause another credit crisis and global economic meltdown soon.

Watch China, the other BRICs, Japan & the NASDAQ if you feel me.

As it stands, US markets have done nothing essentially in 2015 despite a massive re-jiggering/re-fixing of indexes by the sell side boys, and we're setting up for the 3rd mass unrealized gain vaporization event in the last 15 years.

These will lead the bleed.

Wed, 04/15/2015 - 20:52 | 5997096 dimwitted economist
dimwitted economist's picture

Welcome to Fucking REALITY Bitches...

Wed, 04/15/2015 - 21:48 | 5997238 Laowei Gweilo
Laowei Gweilo's picture

the Cornerstone Macro article is really good

 

i take a lot of shits in ZH Chinese articles... so I just want to say something positive when it's really deserved

 

and to be blunt, i agree with ZH analysis more often than not... just sometimes with China there are some fundamental differences that I disagree with in terms of interpretation or translation. but by and large, Zero Hedge is the only place even giving two fucks about this sort of data, and even if I disagree sometimes... at least ZH can make an argument worth disagreeing with, which cannot be said for most of the blogs and sites i read.... so, yeah, props, bjs, high5s, etc etc

....but get a better translator lol

 

 

Wed, 04/15/2015 - 22:40 | 5997374 chilli sauce
chilli sauce's picture

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... www.globe-report.com

Thu, 04/16/2015 - 00:31 | 5997650 TruthInSunshine
TruthInSunshine's picture

SHUT THE FUCK UP.

Your ass is banned, bitch!

Wed, 04/15/2015 - 20:44 | 5997071 tarabel
tarabel's picture

The explanation for the performance of China's stock market is really quite simple. Assets held by ordinary people cannot easily escape China. Therefore, the rats are moving over to the highest side of the sinking ship since they are denied the use of any of the lifeboats.

I've mentioned this many times before. When the two Kilkenny cats swallow each other, the one with the longest tail wins. China does not have the longest tail. America does.

Wed, 04/15/2015 - 21:41 | 5997222 Laowei Gweilo
Laowei Gweilo's picture

actually it is pretty easy... it takes barely any effort and a few minutes to move $50,000 CAD which is quite a lot for most Chinese

 

and for the rest, there are a dozen different companies in Vancouver, Hong Kong, Sydney, etc each that specialize in this, and also make it very easy (and basically your transfer just becomes an internal debit and credit within the company, and no one in either China or Canada cares)

 

so, you're suggestion they're buying Chinese stocks because there is no alternative is incorrect... they could easily buy USD and US stocks if they want... the thing is, they don't want to because as overvalued as the SSE may be, it's nothing compared to the absurdity of the Sp500 -- you see this evident in their real estate investment making it obvious there's no issue of restriction, it's just a matter of choosing the best returns

Wed, 04/15/2015 - 22:23 | 5997328 sun tzu
sun tzu's picture

How many Chinese know anything about US stocks to buy US stocks? Most people invest in their own country's markets. I read financial news for at least 20 hours a week. I wouldn't feel confident investing in Germany, China, Japan, UK, Russia, or Brazil. The news you get would come from the US media and would be few and far in between, unless you can read in those foreign languages. Unless you're a professional trader, you don't invest in foreign markets. The Chinese have heard of American companies, but they don't know them. The same with Americans. I've heard of Huwei Tech, CNOOC, and PetroChina. I don't know anything about their financials or activities.

Thu, 04/16/2015 - 22:55 | 6001632 Laowei Gweilo
Laowei Gweilo's picture

Chinese know most American blue chips rather well, actually, because a lot of them have Chinese presence

I'd almost feel confident saying the average Chinese investor probably knows more about US banks and financial stocks, than most US investors who just use mutual funds... there's a very high level familiarity with a few core blue chip sectors

 

and for those that don't.... picking winners on the SP500 isn't exactly rocket science :P just throw a dart at the board

Wed, 04/15/2015 - 20:49 | 5997084 ted41776
ted41776's picture

historically, the only way to "progress" past what we are experiencing is.......................

Wed, 04/15/2015 - 20:58 | 5997107 miker
miker's picture

No surprise here.  No one should believe any Chinese numbers.  My guess is they are in full contraction and deep recession.  It will be a miracle if they can come out the other end unscathed.

Wed, 04/15/2015 - 20:58 | 5997109 NoDebt
NoDebt's picture

I trust Chinese data.

Wed, 04/15/2015 - 22:04 | 5997285 angel_of_joy
angel_of_joy's picture

They are no worse than our data... just saying.

Wed, 04/15/2015 - 22:15 | 5997312 NoDebt
NoDebt's picture

We are pikers in data-fudging compared to China, though we are catching up fast.

Wed, 04/15/2015 - 21:28 | 5997189 tumblemore
tumblemore's picture

The trouble with the banking mafia is their insane greed doesn't look past the short term. In the short term driving down wages through off-shoring and mass immigration reduces costs and increases profits but the knock-on effect - delayed by credit - is it also reduces demand. Eventually the economy grinds to a halt because neither the cheap labor in China nor the unemployed in America have any money.

 

In the past the banking mafia only destroyed the economy of one country or civilization at a time which allowed them to simply move on to the next. This time, thanks to globalization they are set to destroy everywhere at once.

 

Wed, 04/15/2015 - 21:39 | 5997215 samjam7
samjam7's picture

I usually don't rush to the banker's aid but it's also the consumers that are digging their own grave here. Since they want ever cheaper goods and rush off to the nearest Wall-Mart instead of buying at a more expensive store that still produces in the US. Same is true here in Europe though, people want cheap since they can't see the long term consequences on jobs. For a short time western consumers were able to afford more but on the long run it eroded their own economies (with banksters and CBs gladly contributing to that erosion).

And you are right, thanks to globalization the destrutive forces to come will be much worse.

Wed, 04/15/2015 - 21:37 | 5997211 Budnacho
Budnacho's picture

Obvioulsy the time to BUY MOAR STOCK!!!!

Wed, 04/15/2015 - 22:07 | 5997294 Weaponized Innocense
Weaponized Innocense's picture

No shit and then it's a race it the bottom of what's really peeved to so much bullshit parabolas! YANGS been not wanting to dip on the melt up for parabola get ur yang on shorters of what could buy Australia on the cheap.
Get the popcorn!

Wed, 04/15/2015 - 22:12 | 5997306 Weaponized Innocense
Weaponized Innocense's picture

Crazy that parabola could just be getting started .... Think I might wait till everyone goes 30X marching on different accounts accessed like snails against roadrunner bots! Not sure if I wanna get my yang in yet as hum I'm hopin in the even cheaper and it's so nice and low now
But I have been enjoying faz and uvxy lots.... Hoping for an 8 or 7 on the uvxy! For the serial killer in my rattlesnake portfolio.

Wed, 04/15/2015 - 22:15 | 5997313 Weaponized Innocense
Weaponized Innocense's picture

Got my 3K faz a little bit back on lows~ yum yum

Thu, 04/16/2015 - 01:28 | 5997777 JAMES28
JAMES28's picture

China is growing steadily with true economic growth of 1.6 percent. This clearly shows its leadership in trade market industry of the world leaving behind many big names countries of the world. China will soon become the market leader in all whole sale and retail products with much economic power and influence. Essay Writing Service Help

Thu, 04/16/2015 - 02:36 | 5997863 Wait What
Wait What's picture

"once China also goes all in, and nobody else is left, then the real fun begins"

+1000

I love this. let's take this game to its logical end. it's what Wait What does for fun.

Thu, 04/16/2015 - 16:01 | 6000065 Digmen1
Digmen1's picture

The thing is that China still exports more than it imports.

It makes stuff the world wants and at very low prices.

It has huge foreign reserves

It also has 300 million people in the west of China that it wants to bring into the 21st centruy - houses, jobs, roads, schools etc.

So imho China will keep growing.

It is just going through a transition phase as it tries to cut back on corruption.

It also needs to let its markets do the job, ie stop building ghost cities and roads to no where.

It also needs to stop its corrupt oficcials buying property all over the world.

 

 

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