1/10
We can't make too big a deal out of one month's data, but today's data release does seem to confirm that China's heavily supply-side response to what is mostly a demand-side problem is making the Chinese economy more unbalanced than ever.
stats.gov.cn/english/PressR…
We can't make too big a deal out of one month's data, but today's data release does seem to confirm that China's heavily supply-side response to what is mostly a demand-side problem is making the Chinese economy more unbalanced than ever.
stats.gov.cn/english/PressR…
2/10
In April, according to the NBS, the industrial output proxy rose by 6.7% year on year, and by an even heftier 0.97% month on month. These were above last month's numbers and well above market expectations. They suggest that China' strong production is getting even stronger.
In April, according to the NBS, the industrial output proxy rose by 6.7% year on year, and by an even heftier 0.97% month on month. These were above last month's numbers and well above market expectations. They suggest that China' strong production is getting even stronger.
3/10
Today's data suggest, however, that China's weak consumption is getting even weaker. Retail sales, the proxy for consumption, were up 2.3% year on year, and up a measly 0.03% month on month. Both number were below expectations.
Today's data suggest, however, that China's weak consumption is getting even weaker. Retail sales, the proxy for consumption, were up 2.3% year on year, and up a measly 0.03% month on month. Both number were below expectations.
4/10
The numbers are better for the first four months of the year, but still point in the wrong direction. Year to date industrial output was up 6.3% and retail sales were up 4.1%.
The numbers are better for the first four months of the year, but still point in the wrong direction. Year to date industrial output was up 6.3% and retail sales were up 4.1%.
5/10
How do you reconcile surging production with dragging consumption? There are only two ways. One way is to force further expansion in investment, which was up 4.2% in the first four months of the year. But boosting investment further isn't easy.
How do you reconcile surging production with dragging consumption? There are only two ways. One way is to force further expansion in investment, which was up 4.2% in the first four months of the year. But boosting investment further isn't easy.
6/10
Property investment of course continues to drag. It was down a disappointing 9.8% in the first four months of 2024. Infrastructure investment was up a sharp 6.0%, but there are signs that many in Beijing (correctly) recognize that expanding infrastructure is unsustainable.
Property investment of course continues to drag. It was down a disappointing 9.8% in the first four months of 2024. Infrastructure investment was up a sharp 6.0%, but there are signs that many in Beijing (correctly) recognize that expanding infrastructure is unsustainable.
7/10
The big "winner" was investment in manufacturing, which in the first four months of 2024 grew by 9.7% year on year, but it is exactly this growth which accounts for the surge in production, so it cannot be a sustainable solution to the imbalance problem.
The big "winner" was investment in manufacturing, which in the first four months of 2024 grew by 9.7% year on year, but it is exactly this growth which accounts for the surge in production, so it cannot be a sustainable solution to the imbalance problem.
8/10
The other way to reconcile surging production with dragging consumption is, of course, with a surge in the trade surplus and, not surprisingly, China's trade surplus is indeed extraordinarily high. But for China to continue relying on a surging gap between...
The other way to reconcile surging production with dragging consumption is, of course, with a surge in the trade surplus and, not surprisingly, China's trade surplus is indeed extraordinarily high. But for China to continue relying on a surging gap between...
9/10
exports and imports to resolve its weak domestic demand requires that the rest of the world allow its own manufacturing capacity to wither. Needless to say, the world is becoming increasingly hostile to this requirement.
exports and imports to resolve its weak domestic demand requires that the rest of the world allow its own manufacturing capacity to wither. Needless to say, the world is becoming increasingly hostile to this requirement.
10/10
If Beijing is determined to meet this year's 5% growth target, it will have to choose between a surge in debt directed at more domestic investment or fiscal transfers to boost consumption. There is as of yet little sign of the latter, but I think this will change soon.
If Beijing is determined to meet this year's 5% growth target, it will have to choose between a surge in debt directed at more domestic investment or fiscal transfers to boost consumption. There is as of yet little sign of the latter, but I think this will change soon.
Bloomberg: "China’s economic recovery tilted even further toward manufacturing, leaving it more vulnerable to trade barriers."
bloomberg.com/news/articles/…
bloomberg.com/news/articles/…
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