1/14
China’s National Bureau of Statistics reported today that GDP grew by 18.3% year-on-year in the first quarter of 2021, although on the back of a sharp contraction in the first quarter of 2020, and driven – unfortunately but not...
caixinglobal.com/2021-04-16/chi…
China’s National Bureau of Statistics reported today that GDP grew by 18.3% year-on-year in the first quarter of 2021, although on the back of a sharp contraction in the first quarter of 2020, and driven – unfortunately but not...
caixinglobal.com/2021-04-16/chi…
2/14
surprisingly – by a 25.6% year-on-year expansion in fixed asset investment. Given how useless year-on-year data can be, especially after exceptional periods, many analysts are also reporting that first-quarter GDP rose 0.6% from the fourth quarter last year.
surprisingly – by a 25.6% year-on-year expansion in fixed asset investment. Given how useless year-on-year data can be, especially after exceptional periods, many analysts are also reporting that first-quarter GDP rose 0.6% from the fourth quarter last year.
3/14
But while this helps, it ignores appropriate measures of seasonality, which are especially problematic in a period like ours. The best way to consider the data might be to see how close we've arrived at some kind of “normalcy”, perhaps by comparing it with 2019 data.
But while this helps, it ignores appropriate measures of seasonality, which are especially problematic in a period like ours. The best way to consider the data might be to see how close we've arrived at some kind of “normalcy”, perhaps by comparing it with 2019 data.
4/16
By that measure, first quarter 2021 GDP was 10.3% higher than that of first quarter 2019, for an average growth rate of 5.0% of the past two years. GDP growth was 6.0% in 2019 and was targeted to be “around 6%” in 2020, which I interpreted to mean 5.8-6.0%, so by that...
By that measure, first quarter 2021 GDP was 10.3% higher than that of first quarter 2019, for an average growth rate of 5.0% of the past two years. GDP growth was 6.0% in 2019 and was targeted to be “around 6%” in 2020, which I interpreted to mean 5.8-6.0%, so by that...
5/14
measure China’s GDP is about 2 percentage points below were we might have expected it had Covid-19 not struck.
That doesn’t seem too bad, but of course ignores the composition of growth and the measures Beijing took to keep GDP growth rates artificially high last year.
measure China’s GDP is about 2 percentage points below were we might have expected it had Covid-19 not struck.
That doesn’t seem too bad, but of course ignores the composition of growth and the measures Beijing took to keep GDP growth rates artificially high last year.
6/14
What Beijing considers “high-quality” growth actually shrank substantially during this period, which means that more than 100% (in fact nearly 200%) of last year’s GDP growth was represented by activity on which Beijing has been urgently trying to cut back, one result...
What Beijing considers “high-quality” growth actually shrank substantially during this period, which means that more than 100% (in fact nearly 200%) of last year’s GDP growth was represented by activity on which Beijing has been urgently trying to cut back, one result...
7/14
of which was that last year, China added new debt equal to more than 33 percentage points of GDP in order to achieve nominal GDP growth of 3.0% (real growth of 2.3%). Last year, in other words, was terrible for debt, and terrible for non-productive investment, but it was...
of which was that last year, China added new debt equal to more than 33 percentage points of GDP in order to achieve nominal GDP growth of 3.0% (real growth of 2.3%). Last year, in other words, was terrible for debt, and terrible for non-productive investment, but it was...
8/14
the only way China could show positive GDP growth.
For me (and increasingly, it seems, for economic and financial policymakers in Beijing) the most important data has to do with the relative performance of consumption and household income.
the only way China could show positive GDP growth.
For me (and increasingly, it seems, for economic and financial policymakers in Beijing) the most important data has to do with the relative performance of consumption and household income.
9/14
Retail sales for Q1 – a proxy for consumption – were up a seemingly spectacular 33.9% year-on-year, but they were up an annualized 4.2% from the first quarter of 2019, which tells us that in the past two years, growth in retail sales has lagged growth in...
Retail sales for Q1 – a proxy for consumption – were up a seemingly spectacular 33.9% year-on-year, but they were up an annualized 4.2% from the first quarter of 2019, which tells us that in the past two years, growth in retail sales has lagged growth in...
10/14
GDP by 2 percentage points. This is confirmed by the Q1 residential income data, which jumped 13.7% year-on-year and by an annualized 4.6% from the first quarter of 2019, which means it has lagged GDP by just over 1 percentage point.
GDP by 2 percentage points. This is confirmed by the Q1 residential income data, which jumped 13.7% year-on-year and by an annualized 4.6% from the first quarter of 2019, which means it has lagged GDP by just over 1 percentage point.
11/14
Obviously in spite of what looks like strong first quarter numbers, the Chinese economy has in fact gone in the wrong direction, although I except the rest of 2021 to be much better as we see a bigger consumption and household income rebound over the rest of this year.
Obviously in spite of what looks like strong first quarter numbers, the Chinese economy has in fact gone in the wrong direction, although I except the rest of 2021 to be much better as we see a bigger consumption and household income rebound over the rest of this year.
12/14
Many analysts seem to have used Q1 data to raise their already-high GDP forecasts for 2021 (consensus is now 8.4-8.6% apparently), but this reflects, in my opinion, their failure to understand the “residual” role of investment in infrastructure and property.
Many analysts seem to have used Q1 data to raise their already-high GDP forecasts for 2021 (consensus is now 8.4-8.6% apparently), but this reflects, in my opinion, their failure to understand the “residual” role of investment in infrastructure and property.
13/14
I continue to think that Beijing will take advantage of strong consumption, exports and business investment (tied to consumption and exports) to force a sharp cut in growth in investment in infrastructure and property so that they can achieve GDP growth this year...
I continue to think that Beijing will take advantage of strong consumption, exports and business investment (tied to consumption and exports) to force a sharp cut in growth in investment in infrastructure and property so that they can achieve GDP growth this year...
14/14
of 6-7%, perhaps even a little higher, while keeping the debt-to-GDP ratio steady (which still requires adding new debt equal to roughly 20 percentage points of GDP).
Of course this one-off boost means that next year we'll return to the same old pre-Covid-19 growth model.
of 6-7%, perhaps even a little higher, while keeping the debt-to-GDP ratio steady (which still requires adding new debt equal to roughly 20 percentage points of GDP).
Of course this one-off boost means that next year we'll return to the same old pre-Covid-19 growth model.
I've been reading all day the press and analyst responses to China's data release today, and I have to say that given how badly wrong analysts and the press got their China GDP growth projections last year, I am a little surprised at how, with a few exceptions, they seem to...
...be mostly making the same set of mistakes, but now on the opposite side.
It is a huge mistake to treat growth in property or infrastructure FAI incrementally or independently, when in fact it is usually a politically-determined residual.
It is a huge mistake to treat growth in property or infrastructure FAI incrementally or independently, when in fact it is usually a politically-determined residual.
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