A month ago we warned "Beijing, you have a big problem," [10] and showed 10 charts to expose the reality hiding behind a stock market rally up over 100% in the last year. Tonight we get confirmation that all is not well - China GDP fell to 7.0% (its lowest in 6 years) with QoQ GDP missing expectations at +1.3% (vs 1.4%). Then retail sales rose 10.2% YoY - the slowest pace in 9 years (missing expectations of 10.9%). Fixed Asset Investment rose 13.5% - the lowest since Dec 2000 (missing expectations). And finally Industrial Production massively disappointed, rising only 5.6% YoY (weakest since Dec 2008). Finally, as a gentle reminder to the PBOC-front-runners, a month ago Beijing said there was no such thing as China QE (and no, the weather is not to blame.. but the smog?).
China YoY GDP "nails the number" magically; but under the surface is a disaster...
[11]
Because, as we know, GDP in China is whatever the Beijing politicians say it is (very much like in the US), so we dig deeper.
First, Consumer Sentiment:
[12]
Perhaps driven by, or resulting in, a collapse in retail sales: The lowest growth in 9 years
[13]
... as well as stagnant and declining auto sales (watch out GM).
[14]
But it's not just the consumer though. The very heart of China's capital intensive economy - fixed asset investment - is now in V-Fib. The weakest FAI YoY since Dec 2000!!
[15]
The chart above explains why demand for global commodities will continue to decline for the foreseeable future. The chart below, on the other hand, confirms Yin Weimin worries about a labor slow down: with Industrial Production slowing, there will be far less end-demand for manufacturing production and labor. At 5.6% YTD YoY growth - this is the worst since Dec 2008!!
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And all this leading us to the most important chart of all: home prices in China, which are crashing...
[17]
... at a pace faster than in what happened to US housing in the immediate aftermath of the Lehman collapse!
[18]
And the reason why this is such a problem for China is that unlike the US where the bulk of household wealth is in financial assets (i.e., the market), in China it is the reverse: nearly three quarters of all household assets are in real estate [19]: real estate which is deflating, if not crashing, at an unprecedented pace.
[20]
Finally, here is a chart which leaves even us speechless. If indeed Chinese rail freight is indicative of underlying economic trends, then the hard landing is already here.
[21]
And finally a gentle reminder from just 4 weeks ago:
- CHINA MOF OFFICIAL SAYS NO SUCH THING AS CHINA QE: SEC. JOURNAL
But we are sure this data is just bad enough to spark another surge in front-running Chinese stock investor money.
Sure enough:
- *HANG SENG CHINA ENTERPRISES INDEX EXTENDS GAINS TO 1%
China and Hong Kong stocks love this abysmal data!!
[22]
