China's Economy Continues To Crumble As Key Data Is Worst In 15 Years

Tyler Durden's picture

When China transitioned to a new currency regime midway through last month, the PBoC triggered a veritable meltdown in emerging markets. 

Make no mistake, part of the carnage was due to the fact that by devaluing the yuan, Beijing was effectively robbing the world of export competitiveness at a very precarious time. Fears that a weaker yuan would put upward pressure on regional REERs while further dampening onshore demand exacerbated an already tenuous situation across EMs, and in at least one case, forced the abandonment of a currency peg. 

Having said that, the yuan devaluation was perhaps more significant for what it telegraphed about China’s economy. That is, the yuan had appreciated by some 15% in REER terms in the space of just 12 months, and the fact that Beijing hadn’t gone the nuclear devaluation route (i.e. had “merely” resorted to multiple policy rate cuts) was seen by some as an indication that perhaps the economic situation wasn’t as bad as many people feared. The devaluation effectively crushed that theory and indeed, there are some indications that behind the scenes, China is targeting a devaluation on the order of some 20% which would have the effect of adding back 20 percentage points of export growth on the way to - hopefully- resuscitating output. 

On Sunday, we got still more evidence to suggest that China’s economy isn’t growing at anywhere near the clip the official figures suggest as industrial production came in light of expectations and FAI rose at the slowest pace since 2000. Here’s WSJ:

The data released Sunday pointed to continued weakness across large swaths of the world’s second-largest economy, heaping more pressure on the government to seek to further stimulate activity.

 

“This is very disappointing data,” said ANZ economist Li-Gang Liu.“It’s very difficult to see Premier Li Keqiang getting his 7% growth target this year.”

 

China’s industrial production grew 6.1% year-over-year in August, according to the National Bureau of Statistics. While this was marginally faster than July’s 6.0% level, it compared with an already very low reading in August of 2014 and fell well below a median 6.6% forecast by 12 economists in a Wall Street Journal survey.

 

Fixed-asset investment in nonrural areas of China rose 10.9% in the January-August period compared with the year-earlier period. This was also below expectation and slower than the 11.2% increase recorded in the January-July period.

 


Amusingly, even the NBS was cautious about the outlook going forward:

The statistics bureau warned of continued headwinds. “The foundation for the recovery is not solid,” it said on its website. “External and internal demand for industrial products remains weak and industrial production still faces relatively big downward pressure.”

And here’s a bit more color from Bloomberg:

“The economy is showing no sign of recovery," said Ding Shuang, chief China economist at Standard Chartered Plc in Hong Kong. “From the perspective of monetary policy, the government has done what it can, but demand from the real economy needs to pick up to really make use of that.”

 

The weakening economic figures underscore the challenge the government faces in meeting its growth target of 7 percent this year, as exports decline and producer price deflation deepens.

 

Investment in real estate development rose 3.5 percent in the first eight months of the year, down 0.8 percentage point from the January to July period. That reading was less than a tenth of the pace during the same period five years earlier.

 

 

Of course none of this should come as a surprise. Comparing China's headline GDP prints to individual data points betrays the extent to which Beijing is quite clearly fabricating the numbers. Here, courtesy of RBS, is a chart which vividly demonstrates the disconnect:

And here's a look at FAI components:

As Alberto Gallo notes, "investment cannot go on forever without demand" and indeed, excess capacity in China is one of the main reasons why the global economy is careening headlong into the deflationary doldrums. 

As for what happens when China eventually goes through an inevitable capital stock "adjustment," well, let's just say that if Daiwa turns out to be correct, our projections will look generous by comparison...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
CaptainAmerika's picture
CaptainAmerika (not verified) Sep 13, 2015 8:56 AM
realmoney2015's picture

Yes, China is a factor in the coming collapse. But let's remember who is the real culprit: The Fed!

We cannot let them put the blame on China, Russia, Greece, Europe, ISIS, or any other scapegoat that the bankers create.

The Federal Reserve was started in 1913, the same year as the IRS. Since then the dollar has lost over 97% of its value. The Federal Reserve is not a government agency, it is privately owned by globalist bankers. Remember who the enemy is through all of this.

I started making candles with silver coins (https://www.etsy.com/shop/ScentSavers?ref=hdr_shop_menu) to help educate people on sound money. They are priced at $19.13 to recognize the year that America cmpletely sold out to the bankers.

We all have the same enemy. Don't let them divide us on other minor issues. Ending the Federal Reserve is the main issue of our time. Until that happens, our downward spiral will continue.

order66's picture

You're using ZH to try and sell candles? Are you fucking serious?

realmoney2015's picture

Order66,

I'm using candles to spread silver to people who would otherwise not look into real money. Silver has been used as money for thousands of years. It is real money.

I also use candles to expose the Federal Reserve and the theft that they have committed over the last century.

I figured pople here at ZH, who for the most part understand the Fed and silver, could use them to help educate their loved ones.

Mr Poopra's picture

This is actually kind of cool.  Good luck.

realmoney2015's picture

I wonder who the Fed will blame next for destroying our economy???

KnuckleDragger-X's picture

The FED doesn't blame anybody, they've got other people to do that for them.....

realmoney2015's picture

Haha. Very true! The fed hiode behinds many layers, including the governemnt and the media!

i_call_you_my_base's picture

Better off trying to sell crocheted gun cozies on etsy here.

orez65's picture

"Ending the Federal Reserve is the main issue of our time. "

I can't understand why anyone would down vote your post.

The root cause of all of our economic problems is the Federal Reserve.

The FR counterfeits capital.

The FR makes believe that we have enough capital for endles war, subsidies and inefficiency.

The financial monster that the Federal Government has created can only be killed by cutting out its heart: The Federal Reserve.

AlaricBalth's picture

Fixed asset investments grew at the slowest since 2000.
How many ghost towns does China need???

MSimon's picture

How many ghost towns does China need???

 

Moar!!!!!!!!!!!!!!!!!!!!!!!!!

new game's picture

all of these resources brought fwd has to have consequesces, right?

mankind, the rappper and pillager of mother earth, right?

the day of reckoning comes closer, tic tock...

Abitdodgie's picture

Its China's fault , they have a death star , no wait thats Putin , they throw babies out of --- oh never mind it's just china's fault look what they have done to Amerika's economy.

realmoney2015's picture

Exactly. The Fed is really turning up the blame game. We all know it is the Fed that has screwed America and it's economy!

I AM SULLY's picture
I AM SULLY (not verified) Sep 13, 2015 9:07 AM

The Chinese economy is collapsing, the US economy is collapsing ... NEWS FLASH!!! - THE WHOLE WORLD ECONOMY IS COLLAPSING!

Best Case Scenario: cascading systemic failure, social unrest, pretty much anarchy in every major nation.

Worst Case Scenario: World War 3, which becomes nuclear rather quickly

(brace for impact)

realmoney2015's picture

I agree with your statement. However, I want to clear something up. Anarchy just means no rulers or ruling class. That doesn't sound so bad to me anyway!

MSimon's picture

Anarchy just means no rulers or ruling class. That doesn't sound so bad to me anyway!

 

It is what comes next that you should worry about. The guy calling for law (he is it) and order (to his tastes).

I AM SULLY's picture
I AM SULLY (not verified) MSimon Sep 13, 2015 9:33 AM

BINGO!

Save_America1st's picture

http://wolfstreet.com/2015/09/11/whiff-of-rate-hike-panic-corporations-s...

Corporations in Rate-Hike Panic, Sell Bonds like there’s No Tomorrow, Investors Blissfully Eager

 

Telecom operator Frontier Communications came out of the “shadow calendar” with a $6.6 billion three-part bond offering to fund its acquisition of Verizon’s wireline operations in Florida, Texas, and California. The roadshow was supposed to start on September 10, and pricing was supposed to take place on September 15 or 16, S&P Capital IQ’s LCD reported on Wednesday.

But yesterday, Frontier accelerated pricing of the bonds and moved it forward to today (September 11). Why the sudden panicky hurry?

On September 16-17 is the FOMC meeting. The fateful one. The Fed might decide to kick off the cycle of monetary tightening by raising interest rates from nearly nothing to practically nothing. It doesn’t sound like a big deal, but the cacophony about it has reached a deafening level. With this move, the Fed would kill the Wall Street illusion of ZIRP Infinity, just like it killed the illusion of QE Infinity. And for our over-indebted corporate heroes, such as Frontier Communications, it is a big deal....

Conax's picture

Don't fret, you can rest assured my Shogunate will always be reasonable, equitable and just.  Anyone claiming otherwise will be impaled on a stake in front of the Ministry of Obeisance.

Let us all praise the Conaxian Shogunate. On pain of death!

Ooh Raaah

Ooh Raaah

Ooh Raaah!

 

 

(I didn't get an 'Ooh Raaah' out of some of you..)

tarabel's picture

 

 

But I'm a deaf-mute, Your Magnificence.

Conax's picture

Your slight shall be overlooked this time, due to Our magnanimous  reasonableness.

Don't let it blossom into insolence.

KnuckleDragger-X's picture

At this point it doesn't really matter, except how far civilization falls down. Pick a point, 100, 500, a 1000 years and humanity is quite capable of going there......

nmewn's picture

"Of course none of this should come as a surprise. Comparing China's headline GDP prints to individual data points betrays the extent to which Beijing is quite clearly fabricating the numbers."

Clearly this is all the evidence rational, thoughtful people need to usher in the renminbi-yuan as the new reserve currency and promote Vice Minister of Public Security Meng Qingfeng to world treasurer and Keynesian light giver of the human race!!!

Siiigh ;-)

Oldballplayer's picture

If these are the made up numbers, I would hate to consider the real ones.

nmewn's picture

Right...fake demand & ghost cities for everyone!!!...lol.

buzzsaw99's picture

if the pboc buys enough worthless equities everything will be fine. /s

wmbz's picture

“The economy is showing no sign of recovery," said Ding Shuang

 

This is very, very good news... The stawk market should love it!

QE forever now, for certain. No rate increase, bail-ins, bail-outs, helicopter drops... Pump, pump, pump.

Champagne corks popping, happy days are here again!

buzzsaw99's picture

Brawndo the Thirst Mutilator had come to replace water virtually everywhere. Water, the basic component of all life, was deemed a threat to Brawndo’s profit margin. The solution came during the budget crisis of 2330 when the Brawdo Corporation simply bought the FDA, and the FCC, enabling them to say, do, and sell anything they wanted. [/Idiocracy]

Talleyrand's picture

And this data was released by the National Bureau of Statistics.

 

That's gotta' be some really meaningful shit.

 

MSimon's picture

That's gotta' be some really meaningful shit.

 

It is worse than you could possibly think. Even worse than you can imagine.

khnum's picture

China is still producing its still buying the same or more as it was the problem for places like Canada and Australia is that prices for energy and commodity prices have tanked as have currencies against the US dollar....none of that is Chinas fault

khnum's picture

Steel is down about 4 percent and a few other industries are slightly down,its not production that is the problem its debt for example there are companies not making a profit that are purely working to pay off the banks and when things slow down they borrow more.A viscious circle.We have had the stock market bubble burst the next will be building and construction a 1.7 trillion dollar bubble that has built 70 billion square feet and over 100 huge projects most of which are extremely under utilised.

CloseToTheEdge's picture

in memory of the badass rat...

 

Sun, 12/11/2011 - 23:17 | 1969080 slewie the pi-rat

i had a wooden whistle,

but it wooden whistle

so i got a steel whistle...

...and it steel wooden whistle!

MSimon's picture

I believe China has about 50% of the world's steel making capacity.

 

They have no problem with production. They just pile it up. And when it rusts they just make steel out of high quality ore (rust). What could possible go wrong? It is much higher tech than coolies digging holes and filling them.

tarabel's picture

 

 

I'm  not sure I follow the argument that solid or increasing commodity demand fromn China has led to a collapse in commodity prices that is not its fault.

q99x2's picture

Let me print money and Q99X2 will become the world's leading economic power.

Amish Hacker's picture

Same problem. You have to get people to believe in it enough to accept it as payment.

magnetosphere's picture

ahh the wonders of 35% compound annual growth.  $1 becomes $1 trillion in a single lifetime.  lulz

Pure Evil's picture

All the while that $1 Trillion will still only buy $1 worth of goods and services.

Ban KKiller's picture

Chinese manufactured "stuff" is crap. Who needs their cheaply made junk? Already have enough, ha-ha. 

Independece freaks out those in power. They want you to be slaves to their power sources, food, housing, etc. Oh...and their monetary systems. 

Buying gold paint and painting bricks. Gonna bury them for the future. 

Meanwhile the local coin dealer says he can't sell right now.....gee, really? 

Pure Evil's picture

Oh he'll sell as long as its at or above what he paid for it plus premium.

itstippy's picture

"Chinese manufactured 'stuff' is crap. Who needs their cheaply made junk?"

China can manufacture "stuff" at any quality level Western consumers will buy.  If Apple Corporation insists on rigorous quality controls when manufacturing their iShit, Foxconn's Chinese facilities produce high-quality iShit (at least from a manufacturing perspective).  China builds nuclear weapons, has an advanced space program, designs and builds supersonic fighter jets.  They can build high-quality high-tech "stuff" when called upon to do so.

I agree fully that the vast majority of Chinese manufactured stuff is crap.  Western consumers demand cheap crap.  My fucking toaster is six months old and now it only toasts one side of the bread.  Made in China.  Twenty bucks.  Go buy a new one.  It's aggravating as Hell.  I can't FIND any quality "stuff" any more unless I pay an ungodly premium for some fucking high-end label.  So it's either a $20 toaster that lasts 6 months, or a $200 toaster that says "Subzero" on it and is really worth about $50.  There are no quality middle-class middle-priced goods on the shelves.

American consumers got into brawls over the chance to buy $2 waffle makers at Wal-Mart.  Who in the Hell would want a $2 waffle maker?    Imagine the sticky frustrating half-cooked half-burnt mess you'd get the first time you tried to use it.  But hey, it was only $2!  

tarabel's picture

 

 

I buy abandoned properties and renovate them. Not quite a flipper, more sedate in my approach, but one of the great advantages of this is that people just walk away from all their stuff.

Furniture. Clothes. Appliances. Motor homes sitting in the driveway (my yard looks like a used RV lot, let me tell ya).

Anyhow, I get my pick of all that nice made-in-America stuff that they leave behind when they pack up the Chink crap for the move. Got three different chrome steel toasters from the days when stuff was built to last forever. Steel body blenders. You name it. Oddly enough, though, no waffle irons. You say Walmart has them on sale for $2?  Hmmmm.

Nah, I'll live with pancakes.

JustObserving's picture

Everybody lies about economic growth. Everyone is above average as in Lake Wobegon.

There was no real growth in the land of the free either.  Inflation was adjusted lower to create a fake growth

The Chapwood Index for 2014 was 9.7% and official CPI in the land of the free was only 0.8%.  So the Nominal GDP of 5.6% for 2014 becomes real GDP of -4.1%.

The revised real GDP for years 2011 to 2013 worked out to -6.2%, -6.5%, -6.5% respectively.

What is the Chapwood Index?

"The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation."

http://www.zerohedge.com/news/2015-05-29/inaccurate-statistics-and-threa...

Pesky Varmint's picture

Since China fabricates numbers does this mean the real numbers

are even worse than this print?