Is China’s ‘Real’ Economy Crashing?

Is China’s ‘Real’ Economy Crashing?

Tyler Durden on 03/15/2013 09:55 -0400

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As Marc Faber noted, we hardly expect China to report GDP growth rates that do not perfectly fit the goal-seeked solution for utopian society, but under the covers, there appears to be some considerably more ugly real data. One of the hardest to manipulate, manage, or mitigate for a centrally planned economy is Electricity production. The year-over-year drop in China’s electricity production is the largest since the slump in Q1 2009; and the seasonal drop (associated with the New Year) is the largest on record at 25.3%! So on one hand China is discussing tightening monetary policy amid inflation anxiety and a potential real estate bubble – thanks to the rest of the world pumping free money – and on the other hand Chinese officials are faced with the reality of a drastically slowing ‘real’ economy. At the same time, we note that it appearsChina’s export-import data appears overstatedRock meet hard place. Biggest seasonal drop ever in China electricity production and worst YoY drop since the crash in 2009… And as Bloomberg notes today: Widening differences in bilateral trade data reported by China and Hong Kong suggest export-import activity is being overstated by the mainland as companies report inflated figures, according to Mizuho Securities Asia Ltd. The chart below compares China’s data on monthly exports to Hong Kong the past two years, with counterpart figures from the city on imports.  

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China’s numbers were 47 percent higher than Hong Kong’s in January, compared with a 13 percent difference two years earlier. The lower panel shows reports during the same period for China’s overseas shipments to the U.S., using each nation’s official statistics, where the differential has remained more consistent. Exaggerated trade figures would mean that China’s new leaders, who take over the government at the National People’s Congress this week, are failing to get the boost from global demand that the data indicate as they try to sustain a rebound in the world’s second-biggest economy. Hong Kong passed the U.S. in November to become the biggest export market in China data. Exports to Hong Kong from China rose 60.9 percent in the first two months of 2013 from a year earlier, compared with last year’s 20.7 percent gain for the full year. “This seems inconsistent with the pictures of the final demand in both Hong Kong and the countries for Hong Kong re-exporting,” 

The report (http://images.mofcom.gov.cn/zhs/201301/20130125145056637.pdf) from December 2012 shows that shipments via Hong Kong and other intermediary countries or regions, as well as sales through resellers, account for most of the discrepancy in the nations’ bilateral trade data.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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