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The Softest of Landings [Copy link] 中文

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Post time 2012-1-25 17:29:56 |Display all floors
Much has been discussed about China's soft or hard landing. Here are some facts about China's economy and the outlook for 2012:


1. GDP Growth - Tapering off ever so gently

GDP growth came in at 8.9% y/y in Q4, or 9.2% for the year. This is below the 10-year average of about 9.4%, but within the achievable and sustainable rate of around 8 or 9 percent a year. GDP growth will probably slow a little further before consolidating later in the year, with 2012 growth likely around 8.5%

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2. Inflation - As expected, inflation is down ...

Down yes, but not out. Most of the indicators that predict inflation in China have tracked downwards, and so too has headline inflation, but core inflation remains above the 10 year average, and this is the number one reason why we are seeing a controlled and purposeful constraining of the Chinese economy by authorities. Inflation remains a barrier to stimulus for now.


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3. International Trade - Exports higher, check; imports higher, check.

The full year trade numbers showed exports and imports reaching all time highs, but a great fact is that imports grew faster, both proportionally and in absolute terms, than exports - rebalancing much? Anyway, the dip in the surplus was a drag on yoy GDP growth, and the rise in imports is a very positive trend for those who supply the Chinese industrial and construction growth engine.


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4. Retail Sales - Stronger for longer

On a closely related note, retail sales growth came in very strong (even after factoring in seasonal effects), with the long-phase amplitude showing steady momentum. This is a positive signal on the rebalancing/domestic driven growth front, and this area will likely gain more if growth slows further as the Chinese authorities have signaled that any fiscal stimulus is likely to have due emphasis on the consumer, as opposed to being investment-centric.


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5. Industrial production - chugging along

Meanwhile, one of China's key sources of growth; its industrial engine, continues to chug along. The PMI did dip below 50, but historical patterns show that 40 is the new 50 for China PMI (i.e. the PMI has to drop to around 40 before y/y industrial production growth turns negative), what's more, the recent HSBC flash PMI showed resilience in new orders, and the PMI about flat, if not slightly positive.


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6. Property - A controlled landing for now

Property prices have been broadly falling for the past few months, driven by aggressive moves from the Chinese authorities to clampdown on speculation and promote housing affordability - which goes hand in glove with the ambitious social housing program that promises 10s of millions of new housing units built over the next couple of years. The base case would be more price drops, but no free-fall; in real terms prices have already come-off a lot. At some point prices will likely stabilize when the authorities ease-off a bit and as demand returns.


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Post time 2012-1-25 17:33:00 |Display all floors
Conclusion:

So while there are a few doom and gloom pundits out there,  at the moment all signs are for a continued steady and controlled descent. But what are the risks ? Europe is still the biggest risk for China, property is less of a risk but may pose some tail risks at the margin through government bad debts affecting the banks. A resurgence in inflation (possibly from a premature QE3 from the U.S. pushing up commodity prices) is also a key risk, and a weaker U.S. economy is also somewhat of a risk. Other than that, there is a bit of upside potential, especially if the authorities do more to support growth. Chinese equities got sold-off hard last year on Euro-risks, general risk aversion, monetary tightening, and hard-landing risks. So obviously as those risks, and the perception thereof, begin to dissipate/pass Chinese equity market valuations will likely re-rate accordingly. So for the year of the dragon, 恭喜发财! 一本萬利 !

Sources:

National Statistics Bureau
People's Bank of China
Bloomberg
Trading Economics

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Post time 2012-1-26 17:04:28 |Display all floors
I hope property could be controlled.

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Post time 2012-1-26 17:59:45 |Display all floors
This post was edited by jimlye at 2012-1-26 22:07

The sources you listed is believable and trustful and ahthentic. IMF released some statistics as well. I put it in as a plus. China's economy is toward a soft landing rught now. Good for the governement, businesses and individiuals. Hope the government can use policy regualations, fianancial levers and government controls in a balanced way, so the economy will follow a healthy and stable way.

Growth projections revised by IMF


Teaching Maths with Calculus and Statistics in NZ

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Post time 2012-1-26 20:18:59 |Display all floors
Happy every day forever and ever! Now, what if these cherry picked economic forecasts are wrong? What then? Since when have economists been clairvoyants? Their track record in prediction is historically very, very poor.

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Post time 2012-1-26 20:27:19 |Display all floors
questioner Post time: 2012-1-26 21:18
Happy every day forever and ever! Now, what if these cherry picked economic forecasts are wrong? Wha ...

Yep, I agree but the optimists have a 30:0 lead vs. the competition. They analyzed China's economic system far better than the bears who are most of the time day dreaming - and this since 30 years (hence the 30:0 lead for the realists or optimists).

If you have a choice who would you like to join? The winners or the losers?      

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Post time 2012-1-27 00:38:11 |Display all floors
This post was edited by attilaattila at 2012-1-26 17:38
Yep, I agree but the optimists have a 30:0 lead vs. the competition. They analyzed China's economic system far better than the bears who are most of the time day dreaming - and this since 30 years (hence the 30:0 lead for the realists or optimists).

If you have a choice who would you like to join? The winners or the losers?

The losers. The realists newer were the optimists , and newer will be especially in the long run 30 years is nothing. There is too lot of a bad sign , I forecast growth will slow down faster, and the slowdown will continue in 2013, to 6,8% economic growth in the last quarter year on year in 2013, we shall see. I'll be happy If you were right, but I do not think so.{:soso_e115:}

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