a weekly chronicle of the Chinese economy
Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based arereasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.
The economy reportedly expanded by 7.9%yr in the Decemberquarter (7.8%ytd) versus 7.4% in September, 7.6% in June, 8.1%in March and 9.3% over 2011. The NBS puts the quarterly paceat 2.0%, versus a downwardly revised 2.1% in Q3 (previously2.2%), 2.0% in Q2, 1.5% in Q1 and 1.7% in Q4 a year ago.
was expecting a 7.8%ytd, 2.4%qtr and 8.1%yrcombination based on the data as it stood in Q3 - the fact oneof those numbers is right and the other two are not says moreabout the NBS than
weak grasp of arithmetic.The activity profile now resembles an even shallower “V” thanthe one previously sketched, which makes some intuitive sense.The September quarter certainly didn’t ‘feel’ as strong as itwas originally reported to be and neither did Q2. Even so, Q4looks more than a little undersold at just 2.0% in
opinion, especially by comparison with Q3 & Q2. The former isnow reported as 2.1% and the latter as 2.0%. The thought thatthe pulse of the economy was firmer in Q2 than Q4 is fanciful.
At this time one quarter ago, the partial data for the month ofSeptember were considerable more instructive than the nationalaccounts. They confirmed the tentative acceleration signals
had perceived in the August figures, precipitatingthe statement that
“... the partial data for the month of September, ... , is entirely consistent with the view that thedomestic economy is gradually disengaging itself from a cyclical trough.”
There is nothing quite so significant to derive from theDecember partials, with the ‘turning point’ now an acceptedfact. Yet the degree to which the data are again becomingsomewhat internally dissonant, after a sustained run ofessentially ‘one-way traffic’, should not be ignored. If this were asharp, broad based recovery unfurling itself, there would be fewnuances in the data so soon after the uptrend’s inception. Thefact that a December update of
fixed investmentgrowth can fall (albeit just 0.1ppt) is one symbol of potentialfrailty. The fact that retail sales volumes can decelerate (oneagain, albeit slightly) is another.
view that on-going improvement in activityoutcomes are not assured beyond the middle of 2013 sitsneatly within this analysis. It was weak underlying demand inconstruction, allied to a weak export backdrop, that pulledthe economy down in late 2011 and the first half of 2012.The inventory overlay exacerbated the slowing trend andobscured the nascent upturn for a number of months. Thereversal of inventory dynamics (most spectacularly in the ironore market) has exaggerated the strength of the recovery -and the maturation of the re-stocking phase will remove thatamplification in relatively short order. So while the economyis still accelerating in an underlying sense, as real estate joins infrastructure in describing a positive trajectory, witha monetary policy tailwind that will remain relevant until Q3,we are not far away from our first round of monthly data that‘disappoints’ the extrapolative viewer.
has been hindered in the compilation of thischronicle by the unusually slow and staggered release of thedetailed information underlying the headline growth rates. Itseems that the responsible officials were more interested inwatching Oprah than in performing this particular task withalacrity.
will add to today’s observations earlynext week when more information has come to hand.
18 January 2013
Westpac Institutional Banking Group – Economic Research – email@example.com – www.westpac.com.au
Chinese economic growth
Real GDP growth (lhs)Filtered growth rate (lhs)ICOR* (rhs, inverted)
Sources: CEIC, Westpac. * Incremental capital tooutputratio: GFCF/GDP / GDP growth rate.A falling ratioindicatesgreater efficiency, arising ratiolesser efficiency. In this chart, as theseries isinverted, arising curveis an improvement in efficiency, and viceversa.
Chinese GDP: real & nominal estimates
Deflator %yrReal %yrNominal %yrReal %saar WestpacReal %saar official
Sources: CEIC, Westpac Economics.
Stats of the week: China’s human trafficking recordhas put it on the Tier 2 ‘watchlist’ alongside 41 othercountries including Chad, Mali, Sierra Leone, Venezuela,Malaysia, Russia, Syria, Thailand and Myanmar.
Sources: Westpac Economics, CEIC
Chinese GDP & industrial production
GDP (lhs)TSF (rhs)
Sources: Westpac Economics, CEIC
Chinese GDP & the credit supply