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China sees growth slowing to 7.6% this year

  • China reportedly estimates that growth slowed for the third successive year in 2013, dropping to 7.6% from 7.7% in 2012 but coming in above the government's target of 7.5%.
  • Economists estimate that China will expand 7.6% this year and 7.4% in 2014. The government is reportedly set to keep its growth target at 7.5% next year, the same as that for 2013.
  • Challenges that China has identified include an uncertain global recovery, worsening pollution and social conflicts, and rising labor and environmental costs.
  • In order to deal with the problems of a contracting labor force, China plans to raise the retirement age by five years over the next several years; at the moment, it's 60 for men and 55 for women.
  • The Shanghai Composite is -1.6% in thin trading amid continuing concerns about conditions in the money markets, which had tightened sharply last week and early this week before easing.
  • ETFs: FXI, PGJ, GXC, FXP, HAO, CYB, YINN, CNY, TAO, CHIQ, CHIX, MCHI, YANG, PEK, ASHR, CQQQ, XPP, QQQC, DSUM, YAO, CHXX, KWEB, CHII, FXCH, CHXF, ECNS, CHIE, YXI, CHIM, KFYP, FCA, TCHI, CHLC, CHNA
Comments (2)
  • Michael Nau
    , contributor
    Comments (972) | Send Message
     
    7.6% growth in gdp will require further massive growth in credit. It is possible, but eventually the bubble will stop growing....
    26 Dec 2013, 09:01 AM Reply Like
  • Mike Holt
    , contributor
    Comments (1466) | Send Message
     
    What a crock. Over 50% of China's GDP consists of Fixed Asset Investment spending, most of which is controlled by either local government or central government officials. As such, their GDP growth is not so much the result of economic activity initiated by rational individuals engaging in transactions with other rational individuals on an arms length basis to achieve economically justifiable objectives as it is the result of the CCP Central Committee mandating government officials throughout the country to borrow and spend at a specified level regardless of whether such spending makes economic sense.

     

    Satisfying these GDP growth mandates is the only way local government officials can rise up throuh the ranks of the CCP. If they were to build something, tear it down, and then rebuild it, that would increase GDP growth even further. So guess what, China's GDP growth will be whatever the CCP says it's going to be--or else. Coupled with the fact that GDP numbers are frequently manipulated (or "man made" as the leader of the CCP puts it) it's very easy to get the advertised result. It does not indicate super human capabilities on the part of Chinese government leaders; their failure at so many other things demonstrates otherwise. Just look at their long laundry list of necessary reforms for examples of all their failures.

     

    But, investors often don't care about anything other than the numbers, and bonuses on Wall Street go up when those numbers are higher, so China's economic miracles will likely continue for as long as investors pay attention only to the visible assets and ignore--or fail to properly understand--the less visible debt. Despite the fact that the PBOC has managed to keep things afloat by printing so much money that their $6 trillion balance sheet dwarfs that of the Federal Reserve, and China's money supply is now $18 trillion relative to a GDP of $8 trillion (vs. a "dangerously high" US money supply of $10 trillion relative to a $16 trillion GDP), bad loans abound in China and are causing interest rates to rise and making banks uncomfortable making overnight loans to each other. The party line is that this is just due to less liquidity as the PBOC exercises "more discipline" in order to prevent asset and investment bubbles from forming even as the CCP authorizes another $4 trillion of wasteful Fixed Asset Investment spending, but the reality is that the credit problems in China are not "contained" to only a handful of banks due to "liquidity" concerns over which the PBOC has complete control. The CCP has banned the media from commenting upon this and is now cranking up the propaganda machine that China is so well known for, so for now you will likely hear only lame excuses and witness the state-controlled stock market heading higher, but keep an eye on interest rates in China, and on the activities of banks and local governments to shed non-performing loans in all sorts of creative ways.
    26 Dec 2013, 09:02 AM Reply Like
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