Tuesday 20 January 2015

China growth slows..but not really

The key here is not to forge the impact of compound growth. As much as a pinch of salt must be given to all Chinese Tractor Stats given their source, at the base level China has been growing its economy very quickly for many, many years.

It had plenty of ground to make up, but fundamentally, the growth has been there in spades, literally.

Since the great recession there must be a big worry that much of China's growth has come from leveraged over-investment, much as the West's growth in the naughties was also financed on the never-never which has come back to bite us quite nastily. When this happens to China, as has happened to every other Country in history that has over-invested in infrastructure to such an extent, it could get nasty. Given China's massive population its ability to absorb over-investment is colossal, so this may be a few years or decades away. That one is as hard to predict as the next house price crash in the UK.

But, back to the point about why China's slowing growth is a chimera, here are the reported real GDP stats for China going back 12 years at current dollar prices:

Date                 Value                        Change   %

2013         4,864,002,759,905                7.67 %

2012        4,517,459,790,990                 7.65 %

2011        4,196,333,171,021                 9.30 %

2010        3,839,284,159,376               10.45 %

2009        3,476,132,934,123                 9.21 %

2008        3,182,858,058,706                 9.63 %

2007        2,903,149,265,437               14.16 %

2006        2,542,999,615,098               12.68 %

2005        2,256,902,590,825               11.31 %

2004        2,027,582,320,700               10.09 %

2003        1,841,832,751,026               10.03 %

2002        1,674,007,186,130               11.13%

So overall in real terms the Growth that China has now and in the near future is that same, or even greater than at the height of the mid-noughties growth as the base is so much bigger. It gives some context to bearish doom-mongers about the future of commodity and oil prices in the medium-term; there is still huge demand from China and it is in real terms still growing exponentially.


phil5 said...

So we're keeping the Xcite and the EMED shares, right :-)

Nick Drew said...

in the greater scheme of things, the inevitable Chinese correction is only a blip

but it could be mighty uncomfortable, not least for a Party that doesn't offer many safety-valve mechanisms for unrest

dearieme said...

"in the greater scheme of things, the inevitable Chinese correction is only a blip": you could say that about the fall of the Roman Empire. In only 1300 years or so Britain was back to about the same standard of civilisation.

Suffragent said...

Chasing that GDP dragon again CU . So the Chinese figures can’t be trusted.
Picture the UK early 2008. After a few years of work free growth, people are flipping houses on credit cards like it’s shrove Tuesday, B&Q are being ram raided on a daily basis and from the equity of these transactions, people are buying the biggest SUV’s for the safety of their children, imported crap decorations, sending food back at top rate restaurants, getting vajazzled and their toes eaten by small fish (and that’s just the guys). Now that’s a buzzing economy.
Nobody saw it coming (but lucky for the BOE who had only just changed the terms of their pensions) the party got raided by the financial fuzz.
(Because of the mericuns) sarc off, the banks run out of dosh, the stock market collapses. Lead by the financials and then by business, who were a bit strapped for cash. So pensions get hammered. Many businesses go on short time. Financial houses who make up for 50% of the economy shed dead weight like a leper at a disco. Contractors are shelved by the thousand (a lot of self-employed around for the next crash).House prices fall. Retail falls of a cliff, with the high street decimated. All the poles (who were working cash but spending money on rent, fags, second hand cars and airline tickets……) are gone. EVERYBODY hunkers down and stops spending money. It was the end of the world I tells Ya (or maybe that was Peston)
So the cost to the economy of this carnage -0.8%. The following year 2009 was more credible at -5.8% and being so bad, allowed growth in the next year. But here’s a thing, with 2006 and 2007 having positive growth (exponential function included). Was the economy 2010 just as strong as 2005? And if it was, what of the populations wealth and prosperity? With a 30% devaluation of the pound, savings gone and pension reduced……………….is chasing GDP in the best interest of the country and are our figures any better?
Putting Tinfoil hat on again. Or has our money system been so fucked up, that the wealth of 99.9% of the population is now insignificant to that sloshing around in the markets?

CityUnslicker said...

Suffragent - none of that applies in China. in the UK we have the highest personal indebtedness in the world. Our country, along with Japan, is not well positioned to suffer a financial crisis.

For all the many problems China has, which are manifol, the people there save and save and save. There is no welfare state so you need to keep your money. Even with the recent pumping of money into their economy, the average person is not exposed like they are in the UK.

Steven_L said...

For all the many problems China has, which are manifol, the people there save and save and save

and lend it to the Chinese government, who lend it to the US government, and hope to get it back in one piece.

Sebastian Weetabix said...

Living in China I learned that everybody lies all the time. You know they're doing it, they know you know, but everyone carries on doing it anyway. That's true of Chinese government stats in spades.

Suffragent said...

I know the UK eononomic good times were driven by debt. That's another discussionn My point was the accuracy of GDP in any country. The whole country went from spending money like sailors on shore leave to Jesuits overnight and this only resulted in a -0.8% drop in GDP. Inflation is another once upon a time number. When the numbers are so manipulated what can you trust.