No Sharp Turns From China’s Potential

Full year, real GDP in China grew by 2.3% making the Chinese economy the lone entry in the plus column for 2020. As I wrote before, they’ve quite intentionally grabbed the label of “cleanest dirty shirt” and are content to run away with it. And you can understand, given these misconceptions, why they would.

The rest of China’s data, on the contrary, demonstrates very well “no sharp turns” as it pertains to “returned to its potential output level.” That level isn’t what you’re left to believe otherwise.

Industrial Production rose 7.3%, boosted by China making temporary use of a global economy largely shuttered everywhere else – and still it could only manage 7.3% at best, huge contributions to the panicked Western demand for healthcare goods included. In terms of fixed investment (FAI), it has rebounded like anything else but ended 2020 under a cloud of suspicion on the private side (due to how the data is calculated, which is beyond the scope of this presentation).

What that leaves are the faded remnants of “rebalancing”, the very sector into which purportedly massive “stimulus” has been intended. Retail Sales growth actually declined in December compared to November, with many economists blaming cold weather (as if this was January 2014’s North American Polar Vortex reborn and relocated). Even so, going from 5.0% in November 2020 to 4.6% in December simply highlights the lack of roaring, fired up internal Chinese demand.

From that, China’s government is flat out stating “no sharp turns.” When the Chinese economy is at its potential flattened out at these consistently low levels, this also and actually means no one should expect a sharp turn upward, either.

Listen to Xi – and his minions – because the West has fallen prey to inflationary dreams not even the Communist Chinese dare dream. They are thrilled if you believe otherwise. 

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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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Gary Anderson 2 months ago Contributor's comment

Compared to the rest of the world, China is booming. It isn't great, but is relatively ok.