I was listening to Radio 4 at breakfast time last week, when someone came on to talk about Chinese economic growth. We should not, she said, be too worried about it. After all, the Chinese economy is still growing at over 7%, the kind of rate that the developed world can hardly dare to dream of ever achieving again.
I couldn’t quite believe my ears. I had no idea that anyone, anywhere, let alone anyone considered qualified enough to discuss this stuff in public, actually believed the official Chinese statistics anymore.
Let’s not forget even the country’s own leaders have referred to the GDP numbers at “man-made” and “for reference only.” That means that if we want to know how fast GDP is actually growing we have to look at other measures.
In my interview with him in the magazine this week, chemicals expert Paul Hodges refers to two measures he likes – property tax revenues, which are collapsing, and car sales, where the general direction of travel can be backed out from the fact that BMW has just had to pay $820m to its Chinese sales network to help cover some of their losses.
Diana Choyleva of Lombard Street Research makes her own adjustments to the official numbers to try and make sense of them (“China’s data always throw up challenges”, she says). Her results suggest a fairly major slowdown too.
Over the last three years she reckons that growth has averaged about 6% (under half its pre-crisis level) but that by last year it was down to 5% (the official number was 7.4%) and by the fourth quarter had slowed to 3.2%.
She also notes that capital outflows from China are at record highs. That matters: capital flight from any country is pretty much always a “warning signal” that things aren’t going well.
So there you go. There is no way that the Chinese economy is currently growing at 7% plus and not much likelihood that it will for some time to come.
Anyone who wants to argue the point on this might like to read my interview with Paul Hodges in the magazine this week (subscribers click here) or to watch it online here.