Sentences about China

1. There is no rebalancing. 2. Services only growing from increased new loan volume and real estate revenue growth.

Those are from Christopher Balding, here is his full blog post, and also more here.


Supposedly the Q3 RGDP numbers were going to be the first that were not a rolling average, but it doesn't look like that happened.

I'm afraid China may be using price controls and strange reporting methodology to understate inflation and thereby exaggerate RGDP.

Watch the reserves -- when China inflates, they have to support the peg. If their reserves continue to fall at ~$250B/qtr then that looks more likely.

We've seen some truly enormous layoffs so it's not clear how realistic they are or aren't right now in terms of supporting low-productivity labor. Mostly the Chinese economic data remains inscrutable.

What is becoming of laid-off Chinese workers? Are they going back to their villages and returning to the land? Is there any sort of homelessness building-up on cities' periphery?

Sentence about China: all the figures are fake.


When Balding writes that the service sector includes real estate (and, hence, the data overstate the growth of the service sector), I think he means the services provided in the real estate industry (including construction services, brokerage services, financial services, etc.) not the real estate itself (land and brick and mortar). Of course, if China's economy continues to be dominated by real estate development, then the service sector would reflect lots of growth (because so many services are required for development), proof that there's no rebalancing. I'm reminded of Krugman's dictum: aggregate demand is aggregate demand, whether the demand is for mansions and yachts or housewares at Walmart.

Balding says GDP growth of 7.2% is too high to be believed, 6.5% too low, 6.9% perfect.

Is mainland China fighting an Economic Cold War with Hong Kong and Taiwan? Hong Kong is around 3% growth since 2007. Taiwan rebounded strongly after 2008-09 recession but it's 4-5% approx growth since 2002.

The real issue that other commenters may have missed is that the new loan volume growth counts as services and is most likely rolled over old loans aka mislabeled non performing loans. In this case, maybe we should expect even higher "service growth" in the near future.

oh and margin financing for stock purchases in the Shanghai Stock Exchange. Which is up again after the collapse this summer.

"The more capex-intensive the commodity, the weaker the demand growth, while the more opex-intensive the commodity, the stronger the demand growth. Demand has declined by 5.0% for cement, yet demand for gasoline is up 19.1%. This pattern suggests that policymakers are, at least to a degree, successfully creating the conditions for the much-anticipated rotation in economic growth away from investment and towards consumption."

This reminds me of a seer checking the chicken entrails so to predict the future.

In 2011, Stephen Roach predicted private consumption would rise to 45% of GDP by 2015:

As of August, Yukon Huang says we're still around 35%:

How much "growth" can rolling over bad loans get you?

China is doomed without the wisdom of wise men (economist) from the west.

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