Looking Past Gigantic Base Effects To China’s (Really) Struggling Economy

Nominally, total investment was up 35.0% year-over-year with private FAI gaining 36.4% and public (state-owned) investment up 32.9%.

Beside these raw calculations, the NBS over the last fourteen months has disclosed a chained, seasonally-adjusted estimate of monthly changes. Putting these together and working backward to the beginning, we figure that on a purportedly consistent basis (after the latest downward revisions) total FAI in February 2021was 4.5% higher than it appeared to have been in December 2019.

This works out to an annual rate of 3.9% which suggests, like retail sales, not robust where investment-led growth is concerned. In terms of state-owned FAI, the gains continued to conform to the much-publicized program where authorities refrain from overly indulgent interventions and rescues (because China’s communists realized such waste hadn’t rescued China).

Base effects have made the Big Three more difficult to judge, but put altogether all three sets of data add up to what Li Keqiang has already said when announcing the “unexpectedly” low Chinese growth target of “over” 6% this year. These estimates, particularly retail sales, show why authorities aren’t expecting much more than what’s pretty bare bones even after so much time has passed, leaving the rest of the world to deal with the worst two-year period in decades from the one place the rest of the world is really counting on.

The best we can figure, these are not at all the inflationary kinds of results the global economy had been told to pin its inflationary (more completely recovery) hopes upon. But the Chinese, anyway, already know they’re struggling; even if they, like us, aren’t exactly sure by how much.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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