Marc Faber: China's Economic Numbers Are Fake

Late last year, I anticipated that the global slowdown would bring China’s GDP growth down to 2%, a level that would make most nations envious but which would have been catastrophic for China. In the end, robust government stimulus has saved the day, as spending for infrastructure, commodities, and property has soared. The 8% growth target seems likely to be met.

However, the malinvestment from excess lending has made China’s growth dynamic appear incredibly unbalanced as even China bull Stephen Roach opined Wednesday. An asset bubble is forming there. And even though shares tumbled 5% earlier this week, the correction was rather brief as the market came roaring back the very next day.

Perhaps this unbalanced growth and asset bubble is just the price China must pay in order to wean itself from dependence on export to the West. After all, the country is still growing 8% whereas the United States has been in a mild depression over the past nine months.

That may make for nice copy, but is it really true? Is China making the transition? Are they actually growing 8%? Marc Faber doubts it.

China’s economy is growing at 2 percent, not the 7.8 percent its government claims, says economist Marc Faber, publisher of the Gloom, Boom and Doom report.

“The Chinese government is one of the few governments in the world that knows its GDP numbers three years in advance,” Faber told CNBC.

“I’d be a bit careful about China.”

A growing number of investors turned bullish on China after its markets began to rise last March, Faber notes, adding that it’s possible Chinese markets will continue to rise for a while.

There is a lot to like about China. But, this all sounds very toppy to me. Caution is definitely warranted.

Source

Faber: China Really Growing At 2 Percent – Money News

Comments

[Moon Kil Woong]

There is only 2 places to put your money in China, property and stock. Stock bar far being very liquid is the safer of the two. As for real spending and consumption... pshawww. I guess no one has learned from the Japanese property bubble nor the US property bubble. That means they are unlikely to ever learn, Central banks included.

2009 Jul 31 02:26 AM

[Ben Gee]

There are people and there will be people live by the concept that If I agreed with everybody, I will not be noticed. If I disagreed with everybody, even if the chance being right is small, if I turn out to be correct, I will be noticed. We call those people contrarians. They will go against advidence and interporate data in their own way to justify their predictions. Like a clock that has stoped, its time is correct twice a day. If one predicts recession every year, its will stumble on one once in a while and it will take delight on being right. Some predicted the collapse of the Chinese economy for the last 30 years and they will continue to predict China's collapse in the future. Someday, the Chinese economy may collapse if we wait long enough. The average Chinese dynasty lasted about 200 years. Each dynasty had its glorious days. At the height of the Ching dynasty, the Chinese economy produced as much as 52% of the world's output. Relatively, it was almost twice the size of the British or American empires at their height. The Ching dynasty collapsed. The British empire collapsed. The Roman empire collapsed. The Chinese economy may or may not surpass the US. And India may or may not surpass the US or China. That will be for future generations to see.

2009 Jul 31 05:05 AM

[User 353732]

China is a highly manufacturing dependent economy, which means that energy intensive industrial production is a major driver of the economy. In that case, brisk growth in the economy should be industrial production impelled, which would cause electricity use to rise materially.
In fact, China generated less electricity in the first half of 2009 than in the comprable period in 2008. There was a decline of 1.7%. This decline cannot be reconciled with a growth in industrial production or a true recovery in residentail and commercial real estate or a rise in urban consumer spending......all factors that increase electricity use.
In the first half of 2008 when China, it is generally agreed, was , in fact, still expanding because of expanding exports, electricity use grew by 12.9%, which is consistent with double digit growth in industrial production.
The electricity data suggest that while China was indeed growing by 8 to 9 % in the first half of 2008, growth in the first half of 2009 was either negligible or, at best, very modest: but nowhere near 7 to 8%.
China's credit bubble is now inflating rapidly. The most visible manifestation is in the inflation in the price of readily tradeable assets.Easy money/fake credit bubbles all over the world have similar charateristics: growth in the fantasy economy and vapor assets accompanied by deceitful statements from the ruling elite , a fawning acceptance of Govt propaganda by the MSM and a hidden but growing erosion of the true wealth creating capacity of the economy. As here so there.
The Bubble of the East is building. It is likely to be as unsustainable as the the Bubble of the West.

2009 Jul 31 05:45 AM

[doubleguns]

Let us not forget they have had continuing failed bond sales recently which should be a great predictor of things to come.

2009 Jul 31 08:08 AM

[Susan Weerts]

"Fake" is a too strong word. The official numbers certainly hold a lot of water. We'll find out later to what degree. The electricity consumptions probably represent the more accurate state of its economics than GDP. However, to be fair, with so many third parties reporting in China today, the accuracy of China data improves a lot.

I think that no one can dispute that China economics has been expanded in the 2nd quarter. The question is how true 7.9% was? Was it just a rebound from the shutdown production during the Olympic? or short term phenomena from stimulus? Or something permanent? No doubts that Chinese domestic consumption picked up. But is this pickup big enough to offset the consumption slumps in the United States?

I incline to think that the China stock market, even the global market, got ways ahead of themselves. People today run on hopes.

2009 Jul 31 08:43 AM

[nova]

Susan Weerts wrote:

> I incline to think that the China stock market, even the global market, got ways ahead of themselves. People today run on hopes.<

It is not much of hopes as on fraudulently manufactured data and hugely expanded unsustainable debts.

During mid 1930s, Soviet propaganda was telling everybody about overwhelming successes of Stalin's 5-years plans. It were lies. When the Communist Party leaders found about these lies, Stalin initiated purges. 90% of the party elite was liquidated.

China is not as bad as Stalin's Soviet Union but don't be surprised by major political upheavals in China in the next 2-3 years since China is still a communist country. Just do not forget about it!

2009 Jul 31 10:15 AM

[huangthomas]

Their solution is to borrow directly from large state-owned banks. China has been doing it for years. Just look at the bank lending!


On Jul 31 08:08 AM doubleguns wrote:

> Let us not forget they have had continuing failed bond sales recently
> which should be a great predictor of things to come.

2009 Jul 31 10:24 AM

[johnqh]

Suggestions to the speculators (either bull or bear)

The easiest way to get the truth is on the ground. Go to China, make some friends with locals, ask about and observe their lives. You will get much better information that way instead of looking at charts and numbers.

2009 Jul 31 12:57 PM

[nmelendez]

Truth be told, China is still a communist country. It controls it's sectors to maintain their people in line. However, as a capitalist communist country it still has it's potential. My thought would be, if it's getting over 60 billion annually in US money from stocks and bonds, how do you think US will stop it's growth?
Personally, i am betting on China. A bubble forming? With 1.5 billion potential buyers? 300,000,000, which is BTW the size of the US, middle class, already acting as caqpitalists? Sorry, China is an opportunity for a real world market.

2009 Jul 31 04:16 PM

[Gregman2]

The asset bubble is simply adding to China's excess capacity, in all asset classes. Will this lead to what happened in Japan's commercial real estate sector during the 90s? There could be a massive melt down (aka asset price deflation) as over supplies linger on the markets. The truth, there are many empty houses and buildings, but tons of people to fill them, if they were free.;-)

2009 Jul 31 11:23 PM

[Ben Gee]

If electricity consumption is a better indicator of the real economy than GNP, then, China's economy must be many times Japan's. Right? No. There is such a thing as efficient use of energy. If China's use of energy is as efficient as Japan, China can quartriple its GNP with no increase in energy consumption. If you say China's growth figure is a fake because electricity consumption figure is down. Then, is the figure of electricity consumption a fake too? It was produced by the same authority as the growth figure! How can one say one is a fake and the other is not when both were from the same sourse? Is it not possible that as China's use of energy become more efficient, now it consume less energy to produce more?

2009 Aug 01 07:34 AM

[HunterGVL]

As an Air Force Intelligence Officer for 10 years during the Cold War with Russia, I was privy to many instances of Russia's calculating strategies to weaken the U.S. militarily, economically, and through social unrest and anti-democratic slogans for the masses.
China is a communist country. They have both short and long term agendas working right now that will accomodate their goal of global supremacy.
The U.S. stands in their way and they are working diligently to subvert our economy and global opinion concerning our ability to manager our currency. They are hell bent on modernizing their armed forces including building a Navy that will be the largest in the world by 2050. They think long term, are very patient, and look on with amusement at the 4 year attention span of a neurotic, greedy, americans begging for a life of servitude.

Of course their numbers are manufactured! If you had some idiotic country like the U.S. begging you to fund their excesses and lend them money to continue their ill conceived economic policies that will bankrupt them long term, what would you do?

Simple: Give them all the money they want so they can beggar themselves and tell them exactly what they want to hear so they can repeat it back verbatim to an equally uninformed public that wants to dump dollars into the black hole of asia's government owned and manipulated stock market masquerading as a free market zone.

2009 Aug 01 11:50 AM

[gatersaw]

Hunter your posts are interesting but here is something I would like to talk to you about...we all agree the dollar is going to take it in the shorts so then how does Dow Jones go to 0 at a rapid pace? From this distance I have to abide by market forces and inflation will send the Dow above 10,000 early next year as the real bottom of the Dow is seen in the next few months and people escape dollar safety for risk in commodities and some equities. It doesn't matter if only 2 people buy Dow at that time...dollars will be devaluing rapidly and everything will appreciate vs dollar. Oil will surely top $100 in weeks after the real bottom of the Dow is in place. I am just waiting for the next low. At that point I'm all in commodities because corn will always be worth corn whereas dollars will soon be worth pennies.

2009 Sep 04 12:18 AM