Having shown 11 awkward-to-explain charts of the Chinese economy [6], exposed the liquidity crisis that still lingers just under the surface [7], and exposed the "discrepancies that abound" in China's data [8], it was only right and proper in this new topsy-turvy normal that HSBC China Manufacturing PMI - after 8 months of missed expectations (but a very recent surge to the highest levels in 2014) - should smash expectations and surge to 52.0, its highest sicne Jan 2012 (and 2nd highest since the recovery began).
[9]
Despite this exuberant data...
[10]
Employment fell for the 9th straight month.
[11]
As an aside, this is the first time in 16 months that HSBC/Markit's PMI has topped the Government's official print (payback for a good IPO?) but we note below what has happened each time in the past that this has happened...
[12]
With Q2's massive 4x GDP growth surge in total social financing, and the huge 16.4% surge in local government spending in Q2 (6.1% in June alone) compared to a 4% decline in tax revenues; it appears the dragging forward of everything to ensure centrally-planned focused stimulus had the desired outcome has extended (for now) into July's preliminary data.
And just in case anyone gets too excited about what PMI means, here is what BofA research found: "In our view, these data get way too much air time. They give a timely, rough read on the economy, but should get little weight once hard data are released." [6]
* * *
As we concluded previously, what is clear is that, taking the numbers at face value, debt levels are still rising with destructive rapidity in order to achieve even such spotty results as these.
Coming from the broadest perspective, Nominal GDP in the June quarter was an annualized CNY4.7 trillion greater than that of a year a year ago, but in that like period the stock of ‘total social financing' outstanding mounted almost four times as much, or by CNY17.7 trillion.
Chart: Bloomberg
