Between A Rock And A Hard Landing: Chinese GDP Prints At 2 Year Low As Inflation Still Persists

Tyler Durden's picture

Talk about being caught between a rock and a hard landing. China just reported (completely fabricated) Q3 GDP of 9.1%, which was the slowest GDP growth in the past 2 years and well below expectations of 9.3%, which has sent the Hang Seng index down to -3% on the news, and which confirmed that the Chinese economy is slowing... but not enough for the PBoC to release the spigots. Because just after the GDP data we learned that Industrial Production was chugging along at a relatively healthy 13.8% y/y vs Exp of 13.4% while new home prices gained in 69 out of 70 cities on the year. Unless China wants more spontaneous inflation "appreciation" days by its hundreds of millions of migrant workers, it will have to wait for its economy to cool even more before it does anything, meaning that even as it caught in a very unpleasant place, the aftereffects of Bernanke's inflationary exports are still keeping the economy hot. And those hoping that China will be the much needed growth catalyst (sure, we may get the occasional RRR cut but that will be all) will be disappointed. And because suddenly everyone is a China expert, yet doesn't realize that 9.1% is effectively the equivalent of 1.1% stall print in an economy where 8.0% growth is the minimum threshold for social order and stability, please read this.

China GDP:

And how the number was leaked 5 minutes ahead of the official release:

And a slightly more optimistic outlook on the situation, from Bloomberg's Michael McDonough:

Slowest GDP growth in two years takes China one step closer to easing, which still may be a couple months away due to stubbornly high inflation, Bloomberg economist Michael McDonough says.


Headwinds in the export market combined with tighter liquidity conditions will also act as strong headwinds against Chinese growth over the coming quarters.


Growth decelerating slightly faster than expectations all in an environment of no RRR/interest rates hikes since July, external conditions are deteriorating rapidly and liquidity for SMEs is drying up

Either way one thing is certain: hopes that China would appear like a White Knight to Europe's rescue less than a week ahead of the October 23 Summit, with a bailout package in hand, are now crushed.

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chump666's picture

Yeah it's under 9% with inflation on top, hence the sell off.  all bets are off on China now.  Enough of their goldilocks BS and white knight jerkoff, Copper will be decimated on Europe open.

EZ and China will implode at the same time.


RobotTrader's picture

If you are correct, and copper is "decimated", then the PM's will fall 3x faster, and billions more scared money will flee into Treasuries and USDX at Warp Speed.

chump666's picture

100% correct.  USD will be hyper bid, silver/gold will drop hard.  The markets (equity) got to over bid, this should slam reality into them.  But yeah UST's will be bid as will USD.  Actually hard fall with stocks last session, but maybe lock in a 100 to 200 further drop

LongBalls's picture

Time to short the emerging markets. Again?

chump666's picture

Hang Seng.  ASX200, good plays, on 100-200 point drops...also on a good day a 100-200 rises.  But the China GDP mixed with the EZ is going-nowhere-trade.  Good volatlity puts/shorts futures

DormRoom's picture

probably.   If you look @ the bloomberg chart [1] (see above post), and draw a horizontal line @ 9.1% GDP growth, you'll notice that whenever China GDP drops below 9.1%, the economy loses momentum, and GDP drops @tleast 1.5-3% in the subsequent quarters.


9.1% seems to be the stall speed, and China is about to drop below it.



chump666's picture

Then you have the real estate markets falling very hard i.e construction etc,  that has to be a big % of GDP growth. 

Dingleberry's picture

For all you young ones out there playing with real money, let me clue you in to how the world works:  every few years or a decade, a "new" country comes on the scene and is supposedly gonna "take over the world".  It was Japan in the 80s. The Asian Tigers in the 90s. And now China.  Of course, all those nations imploded, and none of them are economically stable. They all must generate enormous trade deficits, just to keep their nose above water.  See a pattern here?? Their card ALWAYS get pulled.  And they lose their wealth.  Just some friendly advice from an old timer.

Mugatu's picture

Well said Dingleberry!

Capital can flow both ways.  Happens to all these "next big Superpowers".  What happens when China experiences their first quarterly investor outflow in a decade? Eventually its going to happen - sooner or later you hit the unforeseen bump in the road.  For an economy that has become accustomed to trillions funneling into their country, it will cause problems when the investor money goes dry.  Does everyone head for the exits at once?  Hard to say, but looks too scary for me.

AldousHuxley's picture

My Soapbox Advice to the OWS Movement and then?some

I may not know much, but I know a lot of it. So I decided to share my opinions and thoughts on what I would do if the OWS movement either elected me Grand Poobah or asked for my advice:

1. The Great Lie of Wall Street.

Every CEO tells the same great white lie. It is at the heart of every communication. It is at the heart of every financial decision. It is, at its very base, the reason why you all are in the 99pct and they are in the 1pct. The Lie ?

Great CEO ?White Lie = We are acting in the best interests of shareholders.

When a CEO utters this lie, everyone automatically forgives whatever they do. Add 10k jobless to the unemployment rolls? Sorry, we did it in the BEST INTEREST OF SHAREHOLDERS. ?Merge or buy a company and cut back across the board? We did it in the Best Interest of Shareholders.

The problem is that unless the company is losing money and it is the only way to keep the company alive, in this era of 9.1pct unemployment ?it NEVER is in the BEST INTEREST OF SHAREHOLDERS.

Shareholders, whether they own shares directly or through mutual funds or pensions do not live in a corporate vacuum. ?Their lives are impacted by far more than the share price of a stock. Every layoff in the name of more earnings per share puts a stress on the economy, on the federal, state and local governments which is in turn paid for through taxes or assumption of government debt?by&.wait for it.. the same shareholders CEOs say they want to benefit.

If OWS really wants to change corporate structure and impact the economy, talk to shareholders. Talk to your parents, uncles/aunts, cousins, friends who own shares of stocks either directly or indirectly and have them state loudly and clearly that they would rather have a higher Price to Earnings Ratio and even a lower stock price than have their TAXES increase in order to support all the people laid off from their jobs in the name of shareholders! ?

You might even consider buying a share of stock. Just 1. Maybe you can all pitch in and then go to a shareholders meeting and let them know how you feel about the best interests of shareholders.

2. ?Push to Make All Financial Institutions Partnerships

We should make all investment banks become reporting partnerships (meaning they still have the same reporting requirements they have today ). I would have no problem with our government loaning money to the partners of Goldman Sachs and Morgan Stanley and other Too Big To Fail Institutions so that they can buy back all public shares of their stock. Of course all those ?partners would become personally liable for repaying that money back to the government. ?It would probably be about 120B dollars in total to take these 2 companies private. That is far, far less than a possible bailout would cost.

Those personal guarantees would change EVERYTHING in the banking industry. It would change the decision-making process across the board. ? There would be a moral hazard to every decision. Today, a wrong decision and they vacation on their yacht. As a partner, ?the wrong decision and they are protesting right next to the OWS crowd as a 99pcter. ?It would be the definition of having skin in the game.

3. ?Limit the Size of Student Loans to $2,000 per year

Crazy? Maybe, maybe not. ?What happened to the price of homes when the mortgage loan bubble popped? They plummeted. If the size of student loans are capped at a low level, you know what will happen to the price of going to a college or university? It will plummet. ?Colleges and universities will have to completely rethink what they are, what purpose they serve and who their customers will be. Will some go out of business? Absolutely. That is real world. Will the quality of education suffer? Given that TAs will still work for cheap, I doubt it.

Now some might argue that limiting student loans will limit the ability of lower income students to go to better schools. I say nonsense on two fronts. The only thing that allowing students to graduate with 50k , 80k or even more debt does, is assure they will stay low income for a long, long time after they graduate! The 2nd improvement will be that smart students will find the schools that adapt to the new rules and offer the best education they can afford. Just as they do now, but without loading up on debt.

The beauty of capitalism is that people like me will figure out new and better ways to create and operate for profit universities that educate as well or better as todays state institutions, AND I have no doubt that the state colleges and universities will figure out how to adapt to the new world of limited student loan

Read more:

kito's picture

Slowest GDP growth in two years takes China one step closer to easing, which still may be a couple months away due to stubbornly high inflation, Bloomberg economist Michael McDonough says.


right..easing...china has been the only ones doing the right thing by raising rates to fend off inflation. and it never crossed chinas mind that as a result of raising rates, growth might take a bit of a hit. lets put this slowdown into perspective, GROWTH IS OVER 9 PERCENT PEOPLE!!!!!

there will be no easing by china until there is a total deflationary/ deleveraging meltdown that would obliterate growth potential. easing at this point by china would ruin whatever little progress they have made against inflation. as it is, their currency move downwards in response to our senate bill will already cause them a bit of a headache. mcdonough dont knowenough......


Tyler Durden's picture

China needs 8%+ growth to avoid a social revolt. Read the last sentence of the first paragraph above and especially the link. So while yes 9.1% on the surface appears big, it is on the margin an extremely precarious number, and anyone who thinks it is actually a big number in absolute terms will be more welcome at Business Insider than Zero Hedge.

Ramboy's picture

Social revolts only happen in nations with an immigration problem.

tmosley's picture

I guess you never heard of the French Revolution.

Ramboy's picture

France has historically had lots of minorities

tmosley's picture

You, historically, had a lot of lies, like that one, just there.

Ramboy's picture

France was the first nation in modern European to permit mass immigration.  Look it up.

tmosley's picture

I looked it up, and you are a liar.

If you have actual evidence (not dumbshit assertions), feel free to post it.  Otherwise, get the fuck out, you fucking tard.

Ramboy's picture

Whatever dude.  Half of their national soccer team is from GUyana.,0,Immigration_History.html

bankonzhongguo's picture

Zhongguo has a 200 million "floating" population, a city-country standard of living disparity that would make the imported Soros frappuchino OWS crowd wince, a sex ratio of around 106 for child bearing years yielding a core element of 20 million potentially unemployed, (extremely) frustrated, rabble-rouser men for the PAP and MSS to worry about. 

Don't worry.  China's feudalism always implodes.

chindit13's picture

Like Egypt?  Syria?  Libya?

Of course, given that Chinese need permission to move amongst provinces, I suppose that does qualify as "immigration".

kito's picture

ouch...banishment from the lush verdant kingdom into the barren wastelands of BI. thats worse than chinese water torture......

tmosley's picture

So some guy says you need to meet an arbitrary target on an arbitrary measure of economic growth to prevent "social revolt", and suddenly we just beleive it?  The statement may or may not be true, but the premises sure aren't.

Seems to me all they have to do to halt then reverse inflation is cut the dollar peg (and perhaps reduce their holdings of foreign paper).  Once they do that, the arbitrary figure of 8% lowers significantly, such that even nominally LOWER GDP is no problem, because they are producing goods for their own consumption, rather than toiling as effective slaves with the West gaining the fruits of thier labor for paper promising future paper.

I don't see the part where China's foreign reserve has disappeared.  It seems to me that that is the ONLY thing that anyone needs to look at.  All this other action is dumb Keynesian hand wringing.  The real fun starts when they realize this shit ain't working, a new guy gets put in charge, and he realizes what the only logical course of action is.

But hey, I'm no China expert.  Maybe all the members of the Communist Party there have been replaced by Goldman execs, and they will keep doing what they are doing until the last helicopter leaves the helipad atop the last bank building to fall to the rampaging hoards of peasants clawing for the blood of party officials who tukderjubs.  Maybe all that paper wil just burn up in the ensuing riots.  That just doesn't really make sense to me, not even POLITICIAN sense.

catch edge ghost's picture

Maybe. But that sounds rather like the musings of crystal ball gazing central planners. Maybe it's 8%, or maybe its -8%.  I don't know and I don't believe the experts know either. I have no doubts there are charts and stuff that supports the position, but I would bet that the West's intelligence apparatus has a better idea of when the Chinese will choose <chuckle> to revolt than do any economists. (See also: MENA)

I found Zerohedge about a year ago while sifting thru propaganda in left wing back channels. The same channels that over the last year or more have worked to quietly motivate the OWS folks.  I don't know who you people are and honestly I don't care. I think it's great, powerful even, that you attract wingnuts from a broad scope of political ideology.

I learned a new word today. post-partisan. I thought, hey, that's Zerohedge, and that's me. But when I read projections like 8% or EVERYBODY DIES, I wonder.  If Zerohedge, and like minded acolytes, are going to be the New Boss, am I just getting fooled again? 

What else can you see that mere mortals cannot?

tarsubil's picture

I feel like if you've ended up at Zerohedge, you should know by now that you trust no one.

Let them eat iPads's picture

It's not real growth, it's the "building a bunch of empty cities and useless shit nobody needs" growth.

Gotta' keep up appearances.

Yogaman's picture

Maybe you can help me understand this better.  If china is both raising rates AND easing(which they are by devaluing their currency recently against the dollar), then isn't it pretty much a RMB valuation wash?  

Ramboy's picture

China must use Jewish accountants

Caviar Emptor's picture

Don't bet on the future that was promised you. Goldilocks died in the West in 2008, and she's choking on her too hot congee in China. Unfortunately though this won't mean that a reset is imminent. TPTB would rather see a biflationary slow meltdown

Gene8696's picture

Maybe OT - but had to share this crazy Chinese shit. People just walking by a child that was run over on the street. These people are going to rule the world? Not my neck of the woods.

qussl3's picture

Not all are assholes, but enough are.

A little more context is necessary i think.

This behavior has alot to do with the "Peng Yu" incident where a good samaritan named Peng Yu, stopped to help an old lady and got sued by her in return.

Courts found in her favor.

Now people are deathly averse to helping others because of that screwball ruling.

reader2010's picture

 Junk me if you like but it reveals again and again the Chinese are junk. 

Putty's picture

I can't unsee that. That will haunt my dreams for many nights.

DormRoom's picture

?  I thought the 5 year plan targetted growth around 7-8% so the economy could better distribute wealth, and transform the economy for green tech jobs, and not be heavily reliant on infrastructure spending.  So China is on track to fulfill it's goal.




I still think China will have a hard landing, but she wil  wait for inflation to ease, before providing stimulus, by builiding up infrastructure in Western, and Inner China.  Also, she has to clean up the shadow banking industry.

Stuart's picture

Nothing wrong with 9+% no matter how negative one tries to spin it......  solid number.   An avid reader but holy jesus man.... the negatve spin crap... enough already.

Tyler Durden's picture

And again...

China needs 8%+ growth to avoid a social revolt. Read the last sentence of the post above. So while yes 9.1% on the surface appears big, it is on the margin an extremely precarious number (likely far lower when one removes the government inventory-build up based goalseeking), and anyone who thinks it is actually a big number in absolute terms will be more welcome at Business Insider than Zero Hedge

qussl3's picture

Yes China needs 8+% growth, but it depends alot on the composition of that growth.

The more that comes from consumption the better.

The headline number would be meaningless if it was all fixed asset investment.

To some degree, growth does appear to be shifting to consumption, how much of that is inflation is likely key though.

Regarding social breakdown, do not be so quick to call for revolt, China has a history of dealing with social unrest, and does so daily, her control over social media and fierce cultivation of self censorship may see the masses placid for longer than we expect.

Ramboy's picture

Closest thing most people here have ever seen of China is PF Chang.

qussl3's picture

Your point being?

Do not underestimate the China's ability to keep the masses in line, or the faith the masses have in the CCP.

It may be shifting but nowhere near as fast as the west thinks.

Do you perhaps live among them?

Speak the language?

Looking at the menu PF Chang's doesnt even serve anything resembling any of the 8 regional fares.



spiral_eyes's picture

What people including Tyler are missing here is that it's not just China that needs 8% growth to avoid a social revolt.

It's America too — 8% growth would give all the #OWS kids a pretty good job.

Where would you rather be? 9.1%, or 1.5%?

All this means is China needs to bail itself out and will probably severely curtail buying (and also start liquidating) treasuries. That might be the pin that bursts the UST bubble... 

Gene8696's picture

As much as I respect you Tyler, i disagree. I have lived the last 5 years there... there will be no revolt. The government is fully in control of the masses. Shit runs like shit... And it is a health & safety nightmare. But government has control of the sheep.

More likely they will put the huge number of 18-30 year old "extra" men to work fighting someone.... If the masses get restless.

PY-129-20's picture

As much as I agree with you on this, I would be careful to be too sure. China has a history full of such revolts and every Chinese CP member knows that very well. Surveillance techniques have changed dramatically since then of course and that might do the trick - but for how long? Does this include some provinces (another very Chinese thing)?

We have seen a lot of riots in China in the recent years - that does not make a revolt. For now, I'll agree with you. It is unlikely. But like Tyler says - if they are not able to keep up with the pace - all bets are off.

eaglefalcon's picture

are you living in a major city there?  i dont think the 18-30 year old there can fight

taraxias's picture

The Hang Seng puking on a "solid number", imagine that........LOL

chump666's picture

Asian markets have been puking on every 'official' number

taraxias's picture

That because they know every "official" number is fiction, not like here.....oh, wait....

chindit13's picture

Try spinning this one:

In addition to what Angelina's beau said above me, compare the growth of debt relative to this GDP growth number, then factor in market interest rates just for good measure.  In the first six months of this year, new bank lending grew by nearly 40% of GDP.  In 2010, it grew 45%.  So that "growth"---even if it lowballs real inflation and is a fabricated number compiled by regional apparatchiks who don't want to deliver below Beijing's mandated growth number---looks rather inefficient.

Make yourself a spreadsheet.  Over every two year period double bank lending.  Add the "official" 18% two year GDP growth.  How many years can this continue before the economy is swamped by interest payments?  How "strong" is growth if it takes 5.5 yuan in debt to produce 1 yuan of GDP?  Heck, even Greece might be able to do that.  And please, do not raise the argument of "all those FX reserves", because that is no argument at all.  First understand what those reserves are, and also what impact they have on the monetary aggregates.

To top it all off, one has to have the faith of Job to believe Chinese credit analysis is so cutting edge that such massive loans could have all passed muster.  In the shadow banking system, now in excess of $1.5 trillion in size, interest rates range from 25-180%.  If you know how "9%" GDP growth can be expected to cover those interest payments, then you've got a job at EU Headquarters.