China's real economy is better than ever

[steelseries779]

I'm pretty sure that your earlier claim of currency intervention is wrong.

China does not have a fully convertible currency. You cannot demand to exchange Yuans for Dollars in unlimited quantities.

No you are wrong. CNY is not a fully convertible currency doesn't mean it can't be traded. And who said it's unlimited amount?

 

[Martian2]

No you are wrong. CNY is not a fully convertible currency doesn't mean it can't be traded. And who said it's unlimited amount?

Show me a reputable citation to quantify the amount that you're claiming. Otherwise, it's just speculation.

 

[steelseries779]

Because the Chinese public has a massive savings rate and they would like to tap into it. But the bottom line is that a majority SOE is primarily funded by the Chinese government.

I mean "go public" is 上市, since SOEs can raise capital from the government, why do they need 上市？

Show me a reputable citation to quantify the amount that you're claiming. Otherwise, it's just speculation.

中国外汇储备为啥减少 都用在预防人民币贬值上了_凤凰财经

If you know Chinese.

凯投宏观(Capital Economics)首席经济学家普里查德(Julian Evans-Pritchard)估计，中国央行4月和5月共卖出137亿美元外汇储备，以防止人民币兑美元走低。普里查德在周二发表的报告中写道，最新数据显示，央行6月份加快了卖出外汇储备的步伐，很可能是为了给人民币带来一定的支撑。

中国外汇储备料首现20年来年度下降_凤凰财经

按照调查结果中值预计，8月起到年底中国外汇储备月均将下降约402亿美元。从去年6月末触及历史高位3.99万亿美元以来，中国外储至7月末月均减少263亿美元，显示被调查者认为中国外储规模将加速缩水。


中国央行和金融机构7月外汇占款降幅均创历史最高水平，其中央行口径外汇占款当月减少3080亿元，佐证了央行净卖出外汇资产是外储缩水的主要因素。中国外汇储备的规模也受到投资损益、非美货币汇率波动等因素影响。

The primary function of FX reserve is FX intervention, to stop a countries currency from devaluating or appreciating too much.

It's funny people here who are not Chinese, but "care" more about China's economy than we do. Face it, China's economy has problems, it's normal, other countries also have problems. China can't grow without any problems. You have to get managed to solve it, rather than explain that China's fine, China is OK, you are lying to yourself.

 

[IN-2030]

China's government lying about economy - Business Insider
I and a few brave experts such as Jim Chanos, Gordon Chang, and David Stockman (speaking at our upcoming IES conference) have been arguing for years that China has the greatest investment and overbuilding bubble in all of modern history.

We’ve also warned that its economic statistics are not real – they are purposefully overstated and then revised later, if at all.

I don’t see how this top-down dinosaur of a centrally planned government can continue in power. I don’t even know how it can exist in a free market/democracy-driven age that already saw the centrally planned economy of the Soviet Union fail miserably.

This is their current strategy to stay in power: Hiring low-skill workers to build more infrastructure and real estate than is actually needed, and keep moving unskilled immigrants from rural to urban areas on a scale never before seen in history…

The demand isn’t even there! They’re just building things no one’s going to use just to keep these people employed and happy. It can’t continue. And when it doesn’t, I don’t see how China will be able to stop these people from revolting.

Since 1983, over half a billion Chinese have moved to the city. 220 million of those just since 2002!

And there are now over 220 million urban residents that are not legal citizens where they live – like illegal aliens from Mexico here in the U.S.

Do you see a problem if this overbuilding and debt-fueled strategy of over-expanding finally ends?

There will be hundreds of millions of unskilled workers stuck in cities. And they won’t even be able to go back to their rice paddies. By now they’re probably paved over with empty condos!

China’s government thinks if it keeps the people employed then they won’t question the corrupt, crony capitalist system in place. So it continues to push its top-down planning through local communist governments that almost totally drive infrastructure and business investment – with no regard whatsoever for free markets!

Sound like a success strategy?

Economists call this an “economic miracle.” The new “state-driven” capitalist model.

I call it absolute BS! Pardon my French.

Adam Smith and the founding fathers of American democracy would have a conniption fit if they heard this!

So let me just add a few charts to the conversation. You might have seen them in other pieces I’ve written. They suggest China’s economy is already failing beyond its recent 35% stock crash – which, by the way, would have been more like 50% if the all-controlling bureaucrats had not totally stepped in and manipulated the markets for their best interest, once again.

Oh… the Mafia would have worshipped the Communist party of China. What’s not to love? Total top-down control and power. Crony wealth in a closed economy. Secrecy. Piracy. I could go on forever. This is heaven for crooks!

Here’s the first chart from Macquarie Research via businessinsider.com, one of our very favorite websites:

Economy & Markets



After the downturn of 2008, growth in railway freight surged to 20% into early 2010. Why? Massive government stimulus in China! But since, it’s faltered back into negative growth between mid-2012 and mid-2013 and back again since early 2014 – now down 12%! That doesn’t bode well at all for manufacturing and exports.

A growing economy?

Not by my watch!

Then take a look at this one:

Economy & Markets



This is another statistic that is hard to manipulate. By that I mean hide! Kind of like the statistic that showed how many buildings weren’t using electricity that revealed how many urban condos were empty. Something like 27%!

This one shows that power consumption also surged 28% into early 2010 but has declined systematically ever since. It went negative in July 2014 and again in March of 2015. Now it boasts a mere 1.8% growth.

Does this sound like an economy that is growing at 7%?

Finally, my favorite. One that is so fundamental to middle- and upper-class growth. Not to mention major exporters from the U.S. to Germany to Italy to Japan – even South Korea.

Auto sales.

Economy & Markets



Again, a surge into early 2010.

And surprise surprise, much slower since. As you can see, auto sales have steadily declined in 2015, currently down 3.4%.

China’s economic model is one of the most unsustainable things in the global economy today. Worse, it’s heavily contributed to a massive real estate bubble that will burst with global consequences.

 

[Martian2]

1. Freight traffic has little meaning. You don't know what's being shipped. If the overall value of the products being shipped has increased, a fall in freight traffic can still mean a big increase in economic growth. If the shipments contain more computer chips, machine tools, pharmaceuticals, etc. then GDP will keep growing.

Let's assume part of the drop in freight traffic was due to less demand for iron ore. Steel is a pretty cheap product. It requires a lot of freight traffic to generate a small amount of GDP. However, if China is shipping out more specialty chemicals then the increased GDP from specialty chemical exports can easily make up for the drop in steel exports.

2. Power consumption has little meaning, because you are ignoring efficiency gains. The increase in ultra-high voltage transmission lines decreases the loss in electricity in transmission. More LED lights lessen the need for incandescent energy-intensive light bulbs. A less-hot summer means less air conditioning electricity consumption.

As China's service economy takes off, it requires little electricity to generate large amounts of American-style GDP (ie. advertising, insurance, banking, stock trading, writing computer software, etc.).

The point is that you cannot look at aggregate numbers and draw hard conclusions. There are too many variables.

3. Auto sales growth may simply mean that Chinese families have plenty of transportation. In any case, auto sales growth fell for only one month. You have to remember that Chinese auto sales are still at an astounding 23 million per year. The US only buys about 17 million per year.

It only means that the auto sales sector is not a big contributor to Chinese economic growth this year. However, there are plenty of other sectors.

You are not allowed to cherry pick the data to draw a false conclusion.

 

[55100864]

China is selling Euros too, EU economy is worsening plus the Greece debt default is not actually over.

China FX reserves include 2/3 USD or U.S. Treasury bonds, 1/5 Euros, 1/20 GBP, 1/20 JPY.

if i remember correctly, PM Li have promised EU that china will not selling EURO, and like @utp45 pointed in another thread, china is alway buying low and selling high, so i don't think china is selling Euro, china is probably buying Euro. Also, china bought huge amount of American company stocks in american stock market when it was at the lowest(around 6500) during financial crisis in 2008, now it is around 18000, it also part of foreign reserves, although insignificant, so i guess china is selling US stocks and properties, and converting these dollar to RMB and gold.

 

[Shotgunner51]

Source (The Wall Street Journal. July 8, 2015): China Exports Slide, Imports Tumble - WSJ

I have made similar forecast.

Usually trade surplus of first half-year is around 1/3 of the whole year (due to Chinese New Year in February and other seasonality factors), so if the same trend persists then overall 2015 trade surplus forecast should be around $600-700 billion, to be conservative.

Last year, 2014, trade surplus was $384 billion.

China Balance of Trade | 1983-2015 | Data | Chart | Calendar | Forecast



China trade surplus reaches $137bn (for 2nd Quarter of 2015)

 

[Brickwall]

Now most of people are not sure the Chinese economy is growing or stalling.


Zombie Factories Stalk the Sputtering Chinese Economy

But one thing is sure no one wants its to fall, if its does asian and 2008 crisis may seem like vacation.

 

[zeronet]

China's government lying about economy - Business Insider
I and a few brave experts such as Jim Chanos, Gordon Chang, and David Stockman (speaking at our upcoming IES conference) have been arguing for years that China has the greatest investment and overbuilding bubble in all of modern history.

We’ve also warned that its economic statistics are not real – they are purposefully overstated and then revised later, if at all.

I don’t see how this top-down dinosaur of a centrally planned government can continue in power. I don’t even know how it can exist in a free market/democracy-driven age that already saw the centrally planned economy of the Soviet Union fail miserably.

This is their current strategy to stay in power: Hiring low-skill workers to build more infrastructure and real estate than is actually needed, and keep moving unskilled immigrants from rural to urban areas on a scale never before seen in history…

The demand isn’t even there! They’re just building things no one’s going to use just to keep these people employed and happy. It can’t continue. And when it doesn’t, I don’t see how China will be able to stop these people from revolting.

Since 1983, over half a billion Chinese have moved to the city. 220 million of those just since 2002!

And there are now over 220 million urban residents that are not legal citizens where they live – like illegal aliens from Mexico here in the U.S.

Do you see a problem if this overbuilding and debt-fueled strategy of over-expanding finally ends?

There will be hundreds of millions of unskilled workers stuck in cities. And they won’t even be able to go back to their rice paddies. By now they’re probably paved over with empty condos!

China’s government thinks if it keeps the people employed then they won’t question the corrupt, crony capitalist system in place. So it continues to push its top-down planning through local communist governments that almost totally drive infrastructure and business investment – with no regard whatsoever for free markets!

Sound like a success strategy?

Economists call this an “economic miracle.” The new “state-driven” capitalist model.

I call it absolute BS! Pardon my French.

Adam Smith and the founding fathers of American democracy would have a conniption fit if they heard this!

So let me just add a few charts to the conversation. You might have seen them in other pieces I’ve written. They suggest China’s economy is already failing beyond its recent 35% stock crash – which, by the way, would have been more like 50% if the all-controlling bureaucrats had not totally stepped in and manipulated the markets for their best interest, once again.

Oh… the Mafia would have worshipped the Communist party of China. What’s not to love? Total top-down control and power. Crony wealth in a closed economy. Secrecy. Piracy. I could go on forever. This is heaven for crooks!

Here’s the first chart from Macquarie Research via businessinsider.com, one of our very favorite websites:

Economy & Markets



After the downturn of 2008, growth in railway freight surged to 20% into early 2010. Why? Massive government stimulus in China! But since, it’s faltered back into negative growth between mid-2012 and mid-2013 and back again since early 2014 – now down 12%! That doesn’t bode well at all for manufacturing and exports.

A growing economy?

Not by my watch!

Then take a look at this one:

Economy & Markets



This is another statistic that is hard to manipulate. By that I mean hide! Kind of like the statistic that showed how many buildings weren’t using electricity that revealed how many urban condos were empty. Something like 27%!

This one shows that power consumption also surged 28% into early 2010 but has declined systematically ever since. It went negative in July 2014 and again in March of 2015. Now it boasts a mere 1.8% growth.

Does this sound like an economy that is growing at 7%?

Finally, my favorite. One that is so fundamental to middle- and upper-class growth. Not to mention major exporters from the U.S. to Germany to Italy to Japan – even South Korea.

Auto sales.

Economy & Markets



Again, a surge into early 2010.

And surprise surprise, much slower since. As you can see, auto sales have steadily declined in 2015, currently down 3.4%.

China’s economic model is one of the most unsustainable things in the global economy today. Worse, it’s heavily contributed to a massive real estate bubble that will burst with global consequences.

China's 1st half yr 2015 export is about flat comparing to last yr (down <1%), while Indian export for the same period down 15%, India can still claim their growth rate higher than China's 7%. Indian guys in this thread should pay more attention on how ur government make up the growth rate instead of China's.

China is adjusting her economy structure. China's Freight traffic has been already several times bigger than US's, and electricity generation 1.5 times of USA, while China's economy size is less than 2/3 of US, that is how economy structure works. Otherwise, according to ur assumption, China's economy size should also be at least bigger than USA's. China is producing less coal, less steel, but more chips, more software.....For the car consumption, you have to know more and more Chinese mega cities are restricting car purchases to improve air quality. In Beijing, there is a car plate lottery each yr, the ratio being chosen is between 1:4 and 1:5. Other cities are following. People have to spend their money in different ways.

 

[Post Colonnial]

Big as the stock market debacle may seem, China's bigger problems are :

1) Hidden write offs - as was acknowledged by People's Daily, the provincial and local governments have burnt through huge amounts of borrowed capital in order to meet 'development quotas' set for them. The so called 'infrastructure assets' built with this credit are unusable to the tune of over $10T and an estimated $6T has been confirmed for write-off. Bloomberg estimates this to be as high of $26T USD.

2) The debt bubble into which Chinese stock market 'investors' have gotten into present another dilemna. And this bubble happened so fast within a 12 month period.

3) Chinese investments are abroad and unmovable! I am referring to hordes of Chinese who saw the crash coming and smartly took their money and invested in the USA and Europe real estate. They saved their wealth but will never bring it back.- because they thought China was way too risky even when things were going good, forget about it now and near future when China is crashing at 5 to10% weekly!

CPS ofcourse has little choice. They have to flood wit currency, keep buying more dollars and keep 'saving; their SOE banks!

As to oil prices making Chinese exports cheaper - surw; the attraction has always been that it is cheaper to manufacture in China. Cheaper oil and cheaper RNB only makes it even more attractive to make and buy from China. That's good for the global consumer. Does very little to help with China's own risk management problems.

On the positive side, China has maturity, scale and tight control of all aspects of its legal, social and internal economic environment. For example they can simple order a bank to extend the terms of a bond that some company is unable to repay....therefore I do think they will be able to weather the impending pain.

 

[CAPRICORN-88]

Again, a surge into early 2010.

And surprise surprise, much slower since. As you can see, auto sales have steadily declined in 2015, currently down 3.4%.

China’s economic model is one of the most unsustainable things in the global economy today. Worse, it’s heavily contributed to a massive real estate bubble that will burst with global consequences.

LOL Whatever! China economy has and is evolving into the NEXT STAGE

( The sweatshops are no longer viable and are slowing transfer to other 3rd world economies e.g. Kampuchea, Indonesia, Vietnam, Bangladesh or even India )

and as a mature economy is still ahead of the game.

My advice is: Whenever badwishers like you have something negative to say about China, just look into your backyard.

Look who is adding to your FDI and job employment today? Give you a hint, it start with a capital "C".

The truth is WHEN CHINA SNEEZE, the world will caught a COLD.

As for India catching up, I can only laugh about it. You can have a dozen MODI but it would not help India a bit.

Why? SIMPLE.

India lacks LEADERSHIP. Not one leader is prepared to do POPULATION CONTROL like what the late China Paramount Leader Deng XiaoPeng did.

That is for only for the BETTERMENT of ordinary Indian lives but to CATCH up with China...

INDIA has NO OPTION but to have ZERO POPULATION GROWTH for the next 30 years, India may have a HOPE of being as huge or as advance as China. That is among other things e.g. competent government, etc.

IMO I says IMO, I FAILED to see that in a partially dysfunctional system like INDIA.

Right now, I am living inside a dysfunctional country called Malaysia although I am a Singaporean.

I can see all the flaws NOT visibly notice or present in Singapore e.g. CORRUPTION, NEPOTISM, etc.

Meanwhile we can always sit here and listen to the INDIAN DREAM or more appropiately INDIAN FANTASY.

SO STOP COMPARING INDIA to CHINA as India is certainly NOT in the same LEAQUE.

 

[Emperor Modi]

Modi is on his way to China to save you from economic crisis!

 

[IN-2030]

China's 1st half yr 2015 export is about flat comparing to last yr (down <1%), while Indian export for the same period down 15%, India can still claim their growth rate higher than China's 7%. Indian guys in this thread should pay more attention on how ur government make up the growth rate instead of China's.

China is adjusting her economy structure. China's Freight traffic has been already several times bigger than US's, and electricity generation 1.5 times of USA, while China's economy size is less than 2/3 of US, that is how economy structure works. Otherwise, according to ur assumption, China's economy size should also be at least bigger than USA's. China is producing less coal, less steel, but more chips, more software.....For the car consumption, you have to know more and more Chinese mega cities are restricting car purchases to improve air quality. In Beijing, there is a car plate lottery each yr, the ratio being chosen is between 1:4 and 1:5. Other cities are following. People have to spend their money in different ways.

Indian economy is based on domestic consumption not export centric...Indian economy size is $2.3 trillion where as export size is just $300 billion.Reduction in export in terms of dollor is mainly due to reduction in crude oil and other commodity prices,,as India export huge refined petroleum product and other minerals.
As far as electricity consumption is concern it shows how industry is growing...china's electricity consumption is greater than USA(per capita is still 1/4th) because chinese economy has more share of industry than service sector.Same goes for freight traffic.Also real state sector contribute 8-10% to your economy but demand is slowing as it is already builded over-capacity.
I have also listen that total debt risen to 250% of your gdp...is that true?that means your economy will go like american way?

 

[TaiShang]

Great thread @Martian2 .

Indian participation often reduces the quality of a thread. Therefore, it is always advisable to ignore them (except very few reasonable ones).

It has been shown that, with its economies of scale, if China sneezes, the (relevant part) of the world catches cold. If India catches tuberculosis, the relevant part of the world laughs it
off and .

***

China's economy operating within appropriate range: Premier
2015-8-30 9:25:57

The Chinese economy is operating within an appropriate range and China continues to lead the world in terms of growth, said Premier Li Keqiang.

On the afternoon of August 28, Premier Li Keqiang chaired a State Council special meeting in Zhongnanhai to discuss developments in global economic and financial field and their implications for China and policy responses.

Attending the meeting were leading officials of the State Council and ministers in charge of related economic and financial departments. They discussed the current situation and raised suggestions for the next step of work. After attentively listening to the discussions, Premier Li shared his observations.

He said that recent fluctuations on the international market have an impact on China, yet the Chinese economy is still operating within an appropriate range and China continues to lead the world in terms of growth.

Li said, recent world market volatility has added new uncertainties to global economic recovery. The implications are growing for China's financial market as well as imports and exports, adding new pressure on the Chinese economy.

Li said, in the context of complex and changing situations abroad and deep-rooted problems at home, we pressed ahead with progress while ensuring stability with sustained efforts for structural reforms and targeted macro-regulation measures. These included, among others, cuts in the required reserve ratio, interest rates, taxes and fees and measures aimed at stabilizing the market, which are already paying off.

Positive factors enabled by structural adjustments are topping up momentum for growth. The Chinese economy is operating within an appropriate range and China continues to lead the world in terms of growth. China has great potential for further development and is well capable of effectively managing risks and keeping them under control. This means China will continue to keep the initiative in hand even at times of complexity, he said.

Li said that a host of new measures of reform and development are adopted to add new impetus to economic development and stabilize market expectations.

On economic work in the coming months, Li said, we should not lose sight of the steady, positive trend and should stand firm in our conviction. At the same time, we should face challenges head on, be well-prepared and adaptive for uncertainties, and do whatever we can to maximize the positive factors and defuse the negative ones. The key is delivering results from decisions already made, with top priority given to development. We should fully mobilize governments at both the central and local levels while the proactive fiscal policy and prudent monetary policy will stay in place.

While conducting range-based macro-regulation, we must also be sensitive to subtle developments and be adaptive in policy implementation. To stabilize market expectations, make good policy preparations and make sure main targets for the year's economic and social development are achieved, we will enact more targeted and responsive macro-regulation to offset downward economic pressure, more robust reform and innovation efforts to energize the market, and more effective delivery to secure the positive momentum for growth, he said.

Li said, now that the traditional drivers for growth are not as strong, it is important to come up with new measures to bolster reform and opening up. It is necessary to provide more public goods and services, and encourage mass entrepreneurship and innovation to boost the growth momentum.

New ways of investment and financing are needed to enhance investment capacity of local governments and businesses, delivery of public facilities and major projects, supporting development in central and western part of China and boosting effective investment. These measures will include ear-marked funds, local debt swap, corporate bonds, and adjustment of the proportions of required registered capital in fixed asset investment projects, said Li.

He said in light of burgeoning consumer demands, new policies will be rolled out to unlock consumption potentials and improve living standards through means such as better express delivery and other logistics services. More global cooperation on production capacity will be encouraged as they will sure deliver more win-win results.

Li said that the real economy will be upgraded for better quality and greater efficiency through faster depreciation rate in machinery, textile, light industry and automobiles sectors and more investment channeled towards technical transformation of traditional industries. Corporate R&D innovation will be encouraged by way of extra tax deduction for R&D costs and revision of the Administrative Measures for Determination of High and New Tech Enterprises. Wider application of green, energy-efficient and low-carbon products will be encouraged, and more sectors could plug in the "Internet+" initiative to foster new growth areas. As each sector becomes more vibrant, the stability of the overall economy will be built on a more solid basis.

Li said there exists no basis for continued depreciation of the RMB and China is well positioned to defend the bottom line of preventing regional or systemic risks.

Talking about the financial and capital market in China, Li said that financial stability bears on the overall economy. As an appropriate response to developments in the international financial market, China has recently improved the quotation regime of the RMB central parity. There exists no basis for continued depreciation of the RMB and the RMB exchange rate will stay basically stable at an adaptive and equilibrium level.

It is important to promote financial reform and opening-up and keep a reasonable and sufficient level of liquidity to better serve the real economy. It is important to accelerate relevant institution-building, and foster an open, transparent capital market of long-term stability and ensure its sound development. Risk management needs to be improved to defend the bottom line of preventing regional or systemic risks, said Li.

He urged holding steady against all adversities with undiverted focus on development.

He emphasized that we must cope with the uncertainties and challenges with determination and wisdom. All regions and government departments must hold steady against all adversities with undiverted focus on development, and keen attention to economic issues and trends that are in the making. We should come up with more solid ideas, stay firm in holding dereliction of duty to count and form synergy in our work for tangible results. In so doing, we will be able to maintain medium-high speed of growth and achieve medium-high level of development of the Chinese economy.

 

[terranMarine]