The Chinese Have Their Own Policy ‘Dots’

The Chinese don’t have a set of dot plots; they don’t need them. Authoritarian governments simply tally up their viewpoints and then act on the totality. What’s absolutely clear – even before May – is that authorities in China are acting as if what I just wrote was true.

We’ve already seen as good as it was going to get.

Not because they believe in the inflation story, rather because they see global economic potential as having been more seriously impaired than it already was before last year. Having learned from 2016’s “stimulus” debacle (just ask Li Keqiang, assuming he could answer honestly without risking Xi’s police action ire), China’s economy is stuck in an even lower gear right now compared to five years ago and yet officials continue to – have been for months – unwind all their crisis efforts.

I previously chronicled this point from the point of view of monetary authorities at the PBOC. The latest updated economic data from the Chinese National Bureau of Statistics (NBS) merely add more confirmation. Public sector or State-owned Fixed Asset Investment (FAI) has slowed to the point of now, in May 2021, being likely less than it had been in May 2020 (assuming my calculations for the monthly estimate is close, which it reasonably might be we just don’t know given how the NBS reports only accumulated FAI totals and changes the sample size and makeup each year).

Take Xi (and today’s Li) at his word; they’re getting out of the “stimulus” business even as China’s economy, as you’ll see very quickly, appears stuck at an alarmingly low level of output and activity. Precisely Xi’s point and therefore his directive.

Industrial Production, for example, increased just 8.8% year-over-year last month. The 2-year change, factoring out base effects, works out to the same lackluster 6.5% Chinese industry had been stuck with for years – the same lack of growth which had led Xi to make his radical change to economic plans in the first place (19th Party Congress). And that’s with a whole bunch of “transitory” 2020 boosts to industry.

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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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