October 18, 2011
Talk about being caught between a rock and a hard landing. China just reported (completely fabricated) Q3 GDP of 9.1%, which was the slowest GDP growth in the past 2 years and well below expectations of 9.3%, which has sent the Hang Seng index down to -3% on the news, and which confirmed that the Chinese economy is slowing… but not enough for the PBoC to release the spigots. Because just after the GDP data we learned that Industrial Production was chugging along at a relatively healthy 13.8% y/y vs Exp of 13.4% while new home prices gained in 69 out of 70 cities on the year. Unless China wants more spontaneous inflation “appreciation” days by its hundreds of millions of migrant workers, it will have to wait for its economy to cool even more before it does anything, meaning that even as it caught in a very unpleasant place, the aftereffects of Bernanke’s inflationary exports are still keeping the economy hot. And those hoping that China will be the much needed growth catalyst (sure, we may get the occasional RRR cut but that will be all) will be disappointed. And because suddenly everyone is a China expert, yet doesn’t realize that 9.1% is effectively the equivalent of 1.1% stall print in an economy where 8.0% growth is the minimum threshold for social order and stability, please read this.
And how the number was leaked 5 minutes ahead of the official release:
And a slightly more optimistic outlook on the situation, from Bloomberg’s Michael McDonough:
Slowest GDP growth in two years takes China one step closer to easing, which still may be a couple months away due to stubbornly high inflation, Bloomberg economist Michael McDonough says.
Headwinds in the export market combined with tighter liquidity conditions will also act as strong headwinds against Chinese growth over the coming quarters.
Growth decelerating slightly faster than expectations all in an environment of no RRR/interest rates hikes since July, external conditions are deteriorating rapidly and liquidity for SMEs is drying up
Either way one thing is certain: hopes that China would appear like a White Knight to Europe’s rescue less than a week ahead of the October 23 Summit, with a bailout package in hand, are now crushed.
This article was posted: Tuesday, October 18, 2011 at 4:08 am