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TRI
Suggests China GDP is on the Rise...
April 18 2013 delayed FreeVenue public release of
Jan 18th MemberVenue guidance ~ Today's
Trendlines Recession Indicator
quarterly update reveals Chinese economic activity has been on the
rise for the last six months. Both the
Central Peoples Govt's official GDP figures and TRI's gauge of
baseline Real GDP re-confirm that media & pundit speculation
over the past two years that China's economy had been facing a
business cycle hard-landing was completely unsubstantiated.
Using conventional Q/Q reporting methodology on the CPG data, the Real GDP growth rate
slipped to no worse than 6.0% (March 2012) while TRI's monthly
monitor assessed a low of 7.8% in July 2012. This hiatus is
attributed to engagement by authorities in anti-inflation
activity.
China's official data
released today infers Q4 Real GDP was 8.2% (Q/Q), down from an 8.8% pace in Q3
but vastly improved from the 6.0% in Q1. Conversely, TRI's
monthly gauge of economic activity found December (Q4) to be a
robust 9.4%
(Q/Q), up from an 8.2% pace Sept (Q3). TRI's
measure of animal-spirits-plus projects GDP is en route to a robust
9.9% in February.
From that juncture,
China-specific headwinds should gradually dampen GDP growth rates to
an ultimate annual low of 8.0% in 2020, down from a projected 9.5%
for 2013. At this time no soft-landing of the current business
cycle appears in the visible horizon. Note
the most recent TRI alert:
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Jan 18 2013
Recession Alert: No monthly contractions
nor a business cycle soft-landing are evident within the TRI 2020
visible horizon. |
The trajectory
will change, no
doubt, as Inflation and Inventory factors come into play. Then
layered over those natural business cycles will be external issues and the mitigation efforts via
Monetary Policy & Fiscal Policy as determined by the PBoC
& the CPG.
China has two strategic advantages
going forward. Sitting on $3.2 trillion
of foreign exchange reserves plus its gold, it has proved means to
build public infrastructure when fiscal policy stimulus merits
action. It also possesses the conditions for effecting
conventional monetary policy: the combination of a low (2.5%)
Inflation Rate and a high Prime Lending Rate (6.0%).
Very few G-20
nations have the ability today to lower further their prime rate to
stimulate the private sector let alone w/o fear of spawning
excessive inflation in doing so. Worse, many countries need to
borrow funds today just to keep the phone and lights on, let alone
the ability to invest in strategic infrastructure projects.
In the aftermath of the Games and the Great Recession, a shared
steady hand on the tiller by the PBoC and the CPG has visibly
moderated the amplitude of annual cycles by every measure. The
Gov't appears to have eliminated apparent double-counting in its GDP
data collection. Seasonal cyclical crests were especially high
in the prelude to the 2008 Beijing Olympics with the Real GDP growth
rate setting a recent peak of 27.5% Q/Q in 2007Q1 (compared to USA
modern day high of
15.8% in 1978Q2).
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While most of the G-20 contracted in 2008Q4, China's economic growth
rate slowed from its lofty heights to 2.7% pace. Seeing time was of the essence,
it recovered via a massive ($586 billion - Nov/2008)
fiscal stimulus plan which by 2009Q3 had lifted GDP to a robust
16.1% (TRI) pace by 2009Q2 ... higher and faster than all other G-20
nations.
Potential Headwinds Factors
which could eventually contribute to short/medium/long term weakness
shown in the TRI
outlook incl: (a) a rising exchange rate for the Yuan; (b) rising
inflation; & (c) ageing society demographics
Currency
~ An ever-rising
Yuan will indeed make some Chinese exports more expensive, but in some
sectors this will be offset by a decreased cost for import inputs
and natural resources to maintain competitive advantage.
Inflation
~ China's rate
of urbanization is slowing and albeit not likely to level out at 67%
'til 2030, a slowing of the influx of rural workers will certainly
augment wage pressures. Industrial wages have tripled in the
past twelve years. This factor is already creating
opportunities for periphery nations (e.g. Vietnam).
Demographics
~ The
working-aged population to retired-aged ratio continues to
deteriorate due to multi-decadal adherence to China's official one-child
policy.
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For
comparison purposes, the chart illustrates official
China GDP data expressed both as QY/Y (same quarter
year-over-year) & Q/Q (qtr-over-qtr). The former is an
antiquated reporting method still in use by China and
the latter is the conventional metric used in the USA,
Canada & most other jurisdictions. To give vivid context
to the extent of the smoothing issue, using QY/Y format
on USA GDP data yields a -3.7% Great Recession trough,
rather than the familiar -8.9% rate. Similarly,
the Eurozone trough was -5.3% QY/Y & -11.1% Q/Q.
Thus the chart is clear in illustrating China's 6.0%
QY/Y low is indeed equivalent to a 2.7% Q/Q soft-landing
... not the oft reported hard-landing.
TRI's
proprietary measure of broad economic data filters out
the noise and double-counting errors within the official
Chinese real GDP releases.
Trendlines Research takes pride in its overwhelming task
of securing raw Q/Q data for its chart presentation.
This methodology is employed in all three of its
Recession Indicators (Canada/China/USA) for its superior
reflection of the quarterly pace of economic activity
and is the preferred metric for international
comparisons. |
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Superb
accuracy and timeliness make the TRENDLines Recession Indicator the
premiere composite leading economic indicator available for Canada,
China & USA |
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I'm pleased to tell TRENDLiners this past Winter 86% of
visitors were International (a new record 125 nations: most from USA,
UK, Australia,
France, Germany, Spain, Saudi Arabia, Palestine, Italy &
Trinidad)
![[New!]](../../../images/smallnew.gif){kind=small}
TRI China chart.
FreeVenue charts are generally posted 90-days after the
guidance release at the MemberVenue
JPMorgan![[Under Construction]](../../../images/undercon.gif){kind=small}