China Is Slowing Down
Vitaliy N. Katsenelson writes:
I’ve said for a long time that one should not trust economic statistics data coming from the Chinese Government as it has the incentives (and power) to interrogate the data until it confesses to what it wants to see. Today we learned that industrial production in China rose 8.2% in October, a slowdown from 11.4% growth in September, and falling below expectations of 10.8%. So even though industrial production growth was not great, it was still growth and a fairly decent growth by the “developed” world standard. But there was another bit of news (in the same article) that really bothered me – volume of electricity generation dropped 4% in October - yes, it was a drop. So which number would you trust?
Maybe it is the pessimist in me, or maybe I’ve written so many “China will slowdown articles” that I am looking for data confirming my view (the confirmation bias) – that is possible, I am human after all. Or maybe I have a hard time imagining industrial production rising in high single digits while electricity generated declined during the same time period.
China may have some country specific innuendos that I may be missing being thousands of miles away, but unless proven otherwise I’d believe in decline not growth in the Chinese economy, especially when all the other numbers show decline as well: car inventories are at four year highs, real estate market (both commercial and residential) are overbuilt, government is coming up with a $600 billion stimulus package, unemployment is rising, demand from the developed world has slowed down etc…
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Vitaliy N. Katsenelson, CFA, is director of research at Investment Management Associates in Denver, Colo., and he teaches a graduate investment class at the University of Colorado at Denver. He is the author of “Active Value Investing: Making Money in Range-Bound Markets” (Wiley 2007).
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November 13th, 2008 at 12:16 pm
Don’t use Chinese data. Use U.S. export data: Charting China’s Economic Deceleration. Excerpt:
November 13th, 2008 at 3:37 pm
It appears that the Chinese did learn one thing from USA gov’t: The manipulation of statistics. What a quick study. Who knows, some day they will have a gov’t run by big business too. Oh! wait–never mind.
November 13th, 2008 at 4:16 pm
“China will slowdown ”
which is a lot better then being in reverse
November 14th, 2008 at 12:19 am
Wonder what will happen when the “illegal” peasants can’t find work and have to return to their original provinces? China has internal “illegal aliens”, whose kids can’t attend school since they don’t have official legal permission to live in the cities they’ve moved to for work.. (or maybe that’s changed from like 5-10 years ago?)
The Communist Party survives by being able to grow the economy and provide jobs jobs jobs… Will China end up being a gigantic Singapore before jobs run out and peasants revolt?
November 14th, 2008 at 1:40 am
Are the electricity stats you quoted year on year? If not, October is much cooler than September; less air-con usage. In any case I’m sure the industrial production numbers are made up. Here in Guangdong millions of jobs have been lost and thousands of factories have closed over the last year because of the new labor laws. A huge real estate bubble was popped, and the gov’t/media say as little as they can regarding the situation.
November 14th, 2008 at 8:18 am
Dude. People have been saying that China “has to slow down” for at least 4 years. Is this news? Particularly in a global recession.
November 14th, 2008 at 8:24 am
Barry! I’m discouraged to see such a low quality post here. The opening line here is frickin’ joke…”I’ve said for a long time that one should not trust economic statistics data coming from the Chinese Government as it has the incentives (and power) to interrogate the data until it confesses to what it wants to see.”
Ya think?
Well, I’ve been saying for a long time that you shouldn’t accept wooden nickels.