Putting China's "6.9% GDP Growth" In Context

Tyler Durden's picture

By Michael Lebowtiz of 720Global


In our latest article, “China Growth – Miracle or Mirage” published October 20, 2015, we questioned whether China’s perfectly forecasted and uniquely steady economic growth is a mirage. On Friday morning, following Chinese Premiere Li’s comment that growth was still in a “reasonable range”, China’s central bank (PBoC) proceeded to cut interest rates as well as the required deposit reserve ratio for major banks. The language of the Premier and the actions of the PBoC are contradictory. Their actions in conjunction with their words offer even more evidence to believe reported growth is a mirage and the correct answer to the question.

This postscript offers a series of facts and recent economic data to lend further context toward determining whether China’s growth is, in fact, a miracle or a mirage. Before viewing the statistics below take a moment to consider the following: If China’s economy is in fact
humming along at a “reasonable” 6.9% pace, then what is the logic and motivation behind aggressively easier monetary policy? Put another way, what don’t we know about the Chinese economy?

Central Bank Actions

  • 1yr Benchmark Lending Rate: Since November 2014 China has cut their 1 year interest rate 6 times. Over this period the rate has been lowered from 5.60% to 4.35%
  • Required Deposit Reserve Ratio for Major Banks (determines amount of leverage banks can take and therefore the amount of loans they can make): Since February 2015 China has lowered it 4 times from 19.50% to 17.50%.
  • Renminbi: Since August China devalued their currency 2.8%

Economic Statistics

  • China export trade: -8.8% year to date
  • China import trade: -17.6% year to date
  • China imports from Australia: -27.3% year over year
  • Industrial output crude steel: -3% year to date
  • Cement output: -3.2% year over year
  • Industrial output electricity: -3.1% year over year
  • China Manufacturing Purchasing Managers Index: 49.8 (below 50 is contractionary)
  • China Services Purchasing Managers Index: 50.5 (below 50 is contractionary)
  • Railway freight volume: -17.34% year over year
  • Electricity total energy consumption: -.20% year over year
  • Consumer price index (CPI): +1.6% year over year
  • Producer price index (PPI): -5.9% year over year, 43 consecutive months of declines
  • China hot rolled steel price index: -35.5% year to date
  • Fixed asset investment: +10.3% (averaged +23% 2009-2014)
  • Retail sales: +10.9% the slowest growth in 11 years
  • Shanghai Stock Exchange Composite Index: -30% since June

Are these actions and statistics consistent with a country thought to be growing at 6.90% annually?

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knukles's picture

What statistic is "?8.8%"?   What does the "?" mean?

mijev's picture

"What does the "?" mean?"

That circular question messed with my head (could also be the grog). It's like "what's another word for thesaurus?" Some girl from Taiwan once asked me "What's a Taipei personality?"

mijev's picture

A lot of australians say "yeah, no" - it sounds perfectly natural when you're there and you find yourself saying it too. But when you see it on paper it gives you a "huh?" moment. yeah, no I agree.

Hype Alert's picture

The only thing that matters is people are happy with the 6.9%.  The Emperor's clothes are fantastic, don't you think?

TBT or not TBT's picture

In moar, truth is the first casualty.  

83_vf_1100_c's picture

  As long as the check keeps coming wgaf what oboze wears.

signed the FSA

ebworthen's picture

Has to be a minus, but there is always a question mark when it comes to government statistics.

Did you hear that U.S. unemployment is 5.2%?  *cough*

Ham-bone's picture

Article after article on ZeroHedge talkng about symptoms rather than the root cause of slowing growth.

World Population Growth is decelerating from bottom up


The story of China is the story of Japan...x10


Winston Smith 2009's picture

That's what happens when text is cut and pasted and the character's code isn't found in the character set used by this web page and in your browser. It is then replaced by a "?". A sloppy cut and paste. In this case, I suspect it would be a negative sign - a dash of a kind that doesn't compute here and in your browser.

uhland62's picture

The word is GUESSTIMATE. Or in a popular term 'reading Chine tea leaves with the help of Chinese whispers'. 

They have spoken of 'containing China' for a fair while now. China has contained herself. Next. 

doctor10's picture

"Chinese growth" is right up there with Fed.gov "budget cuts"- which only mean the increased size of next years planned agency budgets has been trimmed back a bit from what the Fed employees of the agency would like to receive

God's picture

Can mr lebowitz do a fucking article of israel?

"israel: miracle from GOD or life sucking global leach!"

JustObserving's picture

Of course, China is lying.

There is no real growth in America either.  Inflation is adjusted lower to create a fake growth.  Everyone lies about growth by lowering inflation numbers.

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 2014 worked out to -6.2%, -6.5%, -6.5%, -4.1% 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."


uhland62's picture

There will be no growth in America and other developed markets until some of the job insecurity is addressed. When you put everyone on a contract, no more stable employment, no more reasonably secure incomes, people do not spend and the economies limp.

If you're on a year's contract you do not spend any more money than you absolutely have to, you delay replacements and when you do have to buy something you'll buy the cheapest. When you are on a one year contract you'll buy the 15 $ jeans, not the fancy 348 $ jeans. They wanted it this way.

Just came home from buying some fabrik for 1/3 of normal retail price. I had looked at the collection of that type of fabric and found that the normal price would bring my project into a price range that I did not want and was prepared to walk out of the store before I found the 'reduced' section. Many people work like this 'no, I don't need it that badly today'. 

Colonel Walter E Kurtz's picture

Right there with you uhland62.

There are many things I could pay for, but can I really afford it? Am I actually going to be increasing any savings I have, 4, 8, 12 months in the future? if the past 5-8 year are any indication, then no. When we all know, down the road the government is going to be coming for all of our savings and/or paychecks, so they can continue to pay for their salaries, pensions, welfare benefits and wars, it makes it very hard to justify spending any "extra" funds you may have. And then we have to hear from the same damn government who has created this high overhead burden cost placed on all the taxpayers/citizens (born and unborn), that we are the problem for not spending. How can they not see, their inability to get their fiscal house in order and fix the structural debt problems they have created all over the place, leads to anyone with any modicum of sense, to hold back on an "extra" spending? Daily we can see all the gyrations they are taking to keep kicking the can, but eventually everyone is going to have to pay. Until they deal with the debt issues, default where they have to, break future payment promises, all we all will get is this same lackluster recovery. Japan has showed us all the future and it is here now. Of course, when you follow the economic advice of Nobel prize winners like Krugman, you get what we now get!         

Offthebeach's picture

China is more efficient. Fewer bags of concrete ripped open and spilled on the ground. They over rebard in the past and used thicker lower quality steel. Now it is thin and light.
So see, less is more, and the GDP grows. Plus IPads are better now.

venturen's picture

They are growing stock market with electronic FED money?

ISEEIT's picture

Comprehension of 'science' is the key.

Only climate 'science' is reliable.

All the rest is subject to the forces of radical 'rightwing' extremism.


Class dismissed.

Government needs you to pay taxes's picture

Those damn white men and their 'science'.  If we could just get back to chuckin' spears at each other and comparing harems. . .

83_vf_1100_c's picture

  is chucking AGM-45s at each other and texting dick pics really that much of an improvement?

Soul Glow's picture

Oh you mean they are lying?

Who fucking knew.

RopeADope's picture

China made the transition to a Western economy.

Financial fraud +4000% will give you a 6.9% GDP growth rate...

Colonel Walter E Kurtz's picture

Who couldanode communists are greedy too?

I mean, we know they like to kill however millions of their own countrymen to implement their system of government. Hell, they even purge people who agree with them, just to teach others a lesson to toe the party line....but I simply would not have expected them to engage in financial fraud!   

V for ...'s picture
V for ... (not verified) Oct 25, 2015 1:15 AM

Ooo, Lordy! Must be those Muslims to blame! Save me, save me from those muslims!!!

Hurricane Patricia. Must be those Muslims to blame! Lordy, save me! Say, what? The hurriane was small.


Can't be those jewish bnksters to blame for anything. They done tlold me that usury is good,and anyone who bails them out of their failed bets is bad.

Hitlery, Sanders the Scam, Trump the trick, Bush the Bombers....save me!


On second thoughts, Fuck you, you liars.


Come close to me in New England, much closer than the Boston bombing. I want to see the whites of your AshekeNAZI eyes one more time before you die.

83_vf_1100_c's picture

  The hurricane was not small. I got 2 acres underwater here in East TX. No Muslim probs today. Prez Hillary keeps me up at night though.

Calculus99's picture

Didn't you all concentrate at school?

Negatives make positives.  

Hence 7% positive growth!

straightershooter's picture

Sure, 6.9% is extremely likely.


GDP= C + I+ G+ Net Export

C increases by over 10%...retail

G is likely increasing, given the nature of government

Net export is even larger compared to previous, due to collapsing of import


The only item that may show decreases is I....as evidenced by the decline of production.....decline of import ( equipment )


So, 6.9% GDP growth for the previous quarter is likely to be true....

All the production, industrial, etc., statistic data indicates that the future GDP growth rate is likely to decrease.....how much? that depends on the inventory....

So long as the C keeps increasing at the rate of over 10%....while G remains positive increase....net export is likely staying at positive, given the collapse of commodity price....the only item that might show decrease is I.....but I, as a percentage of total GDP, may be less than 20% or so, while C is over 60%....so long as C is increasing at over 10%...the GDP growth shall be fine.....

Now, release the credit flood via lower rate and lower reserve ( comparing with negative interest rate in Europe and 0 rate in USA, China still has ample firepower to release credit tsunami..... and C is likely to be kept at the rate of over 10%  ( Gee, in the USA, the C is flat, yet GDP still increases at a rate of over 2%? )


Watson's picture

The only 'context' you need to think about is that China is a communist dictatorship.

In the West, truth about such numbers might make you lose money, or fail to get elected (or both).
In China, it could get you executed.

Remember history: The old USSR regularly announced over-produced grain targets.
In the end, they bought Canadian (and, I seem to remember, even US) wheat, in size.

You _think_ the West is useless just because you can see how it could be much, much better.

Communist countries _really are_ totally useless, at all levels.

That is why their citizens are so keen on leaving, and why their Governments are so keen on censorship.