I still do not believe that the Chinese “recovery” is for real:
Chinese credit issuance surged to a record high in January on the back of a boom in shadow banking, stoking concerns that the economy could overheat.
Total new financing in January reached Rmb2.5tn ($400bn) – up more than 50 per cent from December and more than double the figure a year ago – eclipsing even the start of 2009 when China unleashed stimulus spending to battle the global financial crisis.
…The big increase in credit issuance stems from last year when China slouched to 7.8 per cent growth, its weakest in more than a decade. To revive the economy, the government stepped up the pace of infrastructure investment and gave a green light to banks to provide more funding, including through off-balance-sheet channels.
This succeeded in fuelling a recovery in the final quarter of 2012 and the momentum of that upturn has continued through into the start of this year.
But I would gladly be proven wrong. The FT article is here, and I will admit, at the very least, to needing to revise my views on how often the fires can be restoked. I had been expecting 3 to 5 percent “real growth” for China in 2012. By the way, also from the FT, you will find a more optimistic take on Chinese matters here.
Now there are two new estimates, each revising downward actual Chinese gdp. Here is one report:
Wiemer argues that “household services and manufacturing upkeep” component of the official CPI index is a better measure of services inflation.
And, given that adjustment, from Stephen Green:
…our [gdp] guesstimates for 2011 and 2012 are 7.2% and 5.5%, respectively, compared with the official prints of 9.3% and 7.3%.
From Toshiya Tsugami, here are further worrying signs. About half of measured growth is coming from fixed investment, and yet bank data suggest these investments are a) not close to self-financing, and b) the figures are “grossly inflated” in the first place. By the way, these fixed investments rose 20% from 2011 to 2012, not exactly the rebalancing which everyone is looking for.
I would again stress that we do not yet know what is going on, but it is a mistake to assume that China is in the clear. If you put together the Green and Tsugami modifications into one revision, what kind of growth would we be measuring?