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Barclays Slashes China GDP Projections After Weak Data

Tyler Durden's picture




 

When looking at forecasts for China’s GDP growth it’s best to ignore the projection itself and focus on the direction of the revision. 

That is, there’s still a certain degree to which the sellside has to retain some semblance of politeness when it comes to estimating Chinese output and indeed, even if some trailblazing research team were to decide to break decorum and officially cut estimates to between 0% and 4% (which probably represents a more accurate estimation of how the economy is actually performing) it would be largely pointless because there’s exactly zero chance of the NBS admitting anything like that. Given that, it’s not so much about whether the number is 6.8% or 6.7 or 6.6%, it’s about whether analysts see continued downside risks on the horizon.

With that in mind, and against the backdrop of the worst FAI growth in 15 years, we bring you the following excerpts from Barclays where the EM research team has cut its estimates for Chinese GDP growth in 2015/2016 (note the expectations for monetary policy and the bit about equity and FX turmoil weighing on sentiment).

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From Barclays

We lower our 2015 GDP growth forecast to 6.6%y/y (from 6.8%) and to 6.0% for 2016 (from 6.6%). The downward revisions reflect the faster-than-earlier-expected slowdown in both property investment (to 3.5% YTD) and manufacturing investment (to 8.9% YTD) and continued headwinds to investment into 2016. The new (and lower) base following the NBS 2014 GDP revision on 9 September added c.10bp to the 2015 forecast. In detail, the latest manufacturing PMI as well as the August data confirmed a deterioration in sequential momentum in Q3. Despite strong property sales (14.7% y/y in August), developers have focused on inventory rundowns and earnings growth rather than new construction. As a result, the double-digit contraction in housing starts has persisted for 10 months (-16.7%). Meanwhile, falling commodity prices and a widening PPI deflation rate (to -5.9%) are discouraging manufacturers' inventory restocking amid soft domestic and external demand. The stock market crash and rising CNY depreciation expectations are also hurting investor and consumer confidence, adding downward pressure to growth in the coming quarters. Looking into 2016, we believe the three major headwinds highlighted in the medium term - excess capacity in many industries, oversupply in the housing market and high debt burdens (especially among local governments) - together with anti-corruption and policy uncertainties will continue to weigh on growth.

We continue to look for more fiscal and monetary easing to support growth but we don't expect that to change the economy's structural softening trend. The weakness in recent data confirms that growth is losing momentum despite a fast-growing service sector (rising to 50% of GDP and growing at 8.4% YTD in Q2 2015). This suggests more fiscal support and monetary easing are required to stabilise growth. Indeed, to cushion the growth slowdown, the central government has recently announced a series of measures to support infrastructure investment, such as underground pipes, water and clean energy. These measures include bond issues and PBoC capital injection to policy banks, a third round of local government debt swap (CNY3.2trn in total), and accelerated projects approval by the NDRC. On monetary policy, our base case continues to look for one more interest rate cut in Q4 to lower the real cost of funding and 2 RRR cuts to offset the liquidity drain from capital outflows. Despite the intensifying capital control measures post the 11 August FX regime shift and the PBoC's heavy intervention in the FX markets, we expect the capital outflows to persist in the coming quarters. That said, to stabilise the USDCNY in the near term, the PBoC will likely continue to be reactive rather than preemptive in monetary easing. And a stronger USDCNY target set by the PBoC will imply more RRR cuts in the near term.

 

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Mon, 09/14/2015 - 19:57 | 6548689 knukles
knukles's picture

Tougher anti-corruption policies will lead to lower growth.
Seriously?  What a bunch of tripe.  Nobody can even get close to measuring what goes on in China let alone have any clue as to forecasting what is un-measurable and un-forecastable, FFS

Hey, I got an Obamaesque idea for them.  Know all those empty cities that need some residents?  There're bunches of people trying to escape the Middle East who just might be very grateful for a roof over their heads and have a burning desire to strike back at the western imperialist powers, lending to plausible deniability to the host.

Your turn!

Mon, 09/14/2015 - 20:25 | 6548742 kaiserhoff
kaiserhoff's picture

But knucks, put peoples in them, and there might be some price discovery.

  Oh, the humanity!

Tue, 09/15/2015 - 01:45 | 6549499 Pliskin
Pliskin's picture

You got there first, yeh, well said Knucks. Barclays sees anti-corruption as leading to lower growth, ah, didums, Banky-wankys not gonna get their back-handers.

I fucking hate Barclays, and Barclays fucking hates me.

Hey, Barclays, It's me, Snake, remember that credit card you sent me that I didn't ask for in '93..?

Yeh, I'm gonna pay that back any day now. 

Phsych!

 

 

Tue, 09/15/2015 - 01:55 | 6549512 BadKiTTy
BadKiTTy's picture

0.2%! ............."Slashed"!!! Really????

Tue, 09/15/2015 - 11:57 | 6550864 Winston Smith 2009
Winston Smith 2009's picture

"What a bunch of tripe.  Nobody can even get close to measuring what goes on in China let alone have any clue as to forecasting what is un-measurable and un-forecastable"

Exactly. Think our econmic figures are manipulated? That's nothing compared to theirs. Plenty of corruption, shell games, and massively over-optimistic economic reporting to avoid loss of face (as important to them as with the Japanese) or loss of head.

If you really dig online, you can find all kinds of documention on that, just don't expect to find them easily as the great Red Capitalism "miracle" is a very popular farce. Very few are knowledgeable and honest enough to call it what it is: a "black box" centrally planned economy.

But there is enough data to shown that China is the biggest house of cards in the history of the f'ing world.

Mon, 09/14/2015 - 19:55 | 6548698 TeethVillage88s
TeethVillage88s's picture

China Needs a Major Reorganization.

They need to cut the Fat.

Chop Chop.

The market is puking Rainbow next year.

Mon, 09/14/2015 - 19:57 | 6548701 venturen
venturen's picture

Moar free trillions....Will it ever end?

Mon, 09/14/2015 - 20:03 | 6548711 nmewn
nmewn's picture

Meng, issue arrest warrants for Barclay's CEO & it's analysts immediately!

Mon, 09/14/2015 - 20:26 | 6548747 TeethVillage88s
TeethVillage88s's picture

I may have saved enough charts and tables to put all this is perspective.

But the Article fails to provide enough historical data.

WTF.

Probably my data is only historical or good for debt data that I have found. Probably it is not complete at all.

ZH needs more data in this case. China being a mystery.

Mon, 09/14/2015 - 20:32 | 6548759 arbwhore
arbwhore's picture

OMG. 6% growth?!?! Run for the hills...

Mon, 09/14/2015 - 20:41 | 6548778 coast
coast's picture

Maybe they should slash california GDP....the link is just a map, it takes two seconds to look at....california is burning to the ground..

https://www.google.com/maps/d/viewer?mid=zp8nK_5H0MFQ.kzTmU5XK-qJQ&ie=UT...

Tue, 09/15/2015 - 01:06 | 6549127 tarabel
tarabel's picture

 

 

Two tenths of one percent is hardly a "slash" in growth projections.

And, as we all know, no mainstream investment firm says a single word about China that isn't within approved Politburo guidelines unless they plan on having all their work permts cancelled.

So, in keeping with the standard Commie practice of permitting one-tenth of a percent variation in projections to the downside in order to maintain the illusion of free will, we therefore know that the current operative "party line" is 6.7%.

Which leads me to wonder how many of you are increasing your purchases of Chinese junk by 6.7% this year?

And, no, we aren't counting ludicrous propaganda as a consumable export.

 

Tue, 09/15/2015 - 07:22 | 6549778 Element
Element's picture

-0.4% is a 'slash' now!?

I read the headline and am thinking, gee that sounds bad ... -0.4%!

I was expecting -3 or -4 % to qualify as a 'slash'.

Not pimping for HFT algo readers are you?  lol

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