This week brought more evidence that China’s economy is cooling again after the small bounce of the past few months. In the first two months of the year, industrial production growth dropped to an annual 9.9% from 10.3% in December. Retail sales during the Chinese New Year holiday period grew at the slowest rate since 2004.
Investors should also remember to take China’s official figures with a pinch of salt, says Tom Orlik in The Wall Street Journal. The quality of the data has improved of late, but some of it still looks suspiciously good.
For instance, government figures suggest that fixed-asset investment expanded by 21% year-on-year in December. But “this looks odd” against a 14% annual fall in sales of excavators and a 19% drop in steel prices. These gauges should track investment growth.
December’s exports expanded by 14%, but if you compare this figure with import data in Hong Kong, the first destination for many of China’s exports, it looks too high. Louis Kuijs of RBS thinks the true export growth rate could be 4% lower.
Government purchases distort official retail data and Standard Chartered’s Stephen Green reckons inflation is understated. His alternative measure suggests real GDP growth in 2012 was 5.5%, not 7.8%. That’s “hard-landing territory”.