China Research

Kinas senaste inköpschefsindex återspeglar ingen recession – men ytterligare sänkta kassakrav förstärker oron

Med det nya årets första nummer av denna blogg påbörjas här en liten innovation. Fortfarande skrivs merparten av analyserna mestadels på engelska. För att väcka ytterligare intresse här hemma för Kinas ekonomiska utveckling – vilken blir allt viktigare för den globala ekonomin och Sverige – har vi framöver också en liten sammanfattning på svenska.

Två huvudsakliga slutsatser kan dras av nedanstående analys. För det första betyder siffror som ligger endast snäppet under 50-strecket ingalunda att en recession är nära förestående – utan endast långsammare tillväxt. Recessionsgränsen varierar från land till land och kan ligga i olika länder kanske kring 35 till 45. Närmare information om detta fås dock endast genom mer djupgående, landspecifika undersökningar.

Det betyder också att Kinas senaste PMI-industrisiffror strax under 50 ej får jämställas med en påbörjad recession – utan ”endast” med en inbromsning av tillväxttakten (vilket dock kan vara allvarligt nog eftersom kinesisk statistik ofta inte är riktigt tillförlitlig, speciellt vid en utveckling åt fel håll).

Men det kom en annan negativ konjunktursignal i början av det nya året som framkallar klart större oro hos mig än PMI statistiken, det vill säga aviseringen av en förnyad – ganska omfattande – sänkning av bankernas kassakrav. Denna åtgärd kan ge ett tydligt utökat utrymme till nya krediter och således fungera som konjunkturstimulans. För mig är bankernas kassakrav kanske Kinas viktigaste konjunkturindikator, speciellt vid en (pågående) konjunkturförsvagning.

China’s latest PMI does not indicate a recession – but lower cash requirements for banks increase worries

China has two different PMI producers (see my analysis from September 2018 https://blogg.lnu.se/china-research/blog/china-2/chinas-statistical-conundrums-the-example-of-the-pmis/ – where I also explained some specific characteristics of the PMI). When looking at comments on the official Chinese PMI for December 2018 – the larger one of two Chinese PMIs, produced by the National Bureau of Statistics (NBS) and the logistics and purchasing organization CFLP – I found again some articles interpreting the December number of 49.4 as “below the official borderline for growth”. However, this “growth limit” is not really true – but may indicate that some further weakening of Chinese growth rates could be on its way. (In general terms, ongoing or commencing recessions mostly can be singled out when the PMI index has been falling to a range around 35-45, varying between different countries. For more exact estimates, specific calculations must be made country by country; more precise studies for China’s PMIs remain absent in this specific context).

More weakening ahead – and a slightly lower target for GDP growth

In reality, some more weakening of the Chinese economy may be plausible or even probable. The question, however, is to what extent Chinese statistics transparently will “verify” such a possible and negative economic development any time soon. Chinese authorities prefer instead to show very gradual and small changes between two months or two quarters. This is also why I do not believe in any sizeable GDP change for Q4 in 2018. Q3 gave a Chinese GDP change of 6.5 percent compared to Q3 one year earlier – the lowest growth rate since Q1 ten years ago.

The lowest number that can be expected for Q4 of 2018 should therefore be 6.3 percent. Any number lower than 6.3 percent, I would interpret as a kind of official confirmation that things are really going in the wrong direction. 6.4 to 6.6 percent still looks most probable – perhaps including some window dressing.

I would also guess that new objective for GDP growth in 2019 will be 6 up to 6 ¼ or 6½ percent – but most probably not lower than 6 percent. Things should not develop too badly the year before the official evaluation of achievements since 2014 – at least not according to the official version. And in 2021, time has come for celebrating the 100^th anniversary of the founding of the Communist Party. The need of an impressing success story is obvious.

Waiting for January 21

We are waiting impatiently for China’s next GDP statistics which will be published as soon as January 21 for both Q4 and the whole of 2018. However, interpretation of the so-called underlying growth development – i.e. in reality – will remain difficult.

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

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China’s economic growth has been slowing down somewhat during 2018 – also officially. In q3, GDP rose by 6.5 % compared to q3 last year. “Around 6.5 %” is exactly the official objective for 2018 which certainly will be met numerically. Still, 6.5 % reflects some slight reduction of growth rates during 2018 – underlined also by the weakening of the Shanghai Stock Exchange (SSE) Composite Index by around 1000 points until now from more than 3500 in the beginning of 2018.

Most China observers know by now that the quality of Chinese GDP statistics is underperforming. Therefore, it remains striking how many analysts can come to the conclusion that China’s GDP in q3 did not meet expectations of 6.6 %. This is really hairsplitting.

In the meanwhile, some further official statistical indicators have come in. One may, for example, mention:

¤ “Growth rate of investment in fixed assets”:
+5.7 % Jan-Oct 2018 compared to 7.3 % during the same period last year
–> somewhat dampened growth rate

¤ “Total retail sales of consumer goods”:
October 2018 (in value terms): +8.6 % (CPI Oct: +2.5%); Oct 2017: 10.0 % (CPI Oct 2017: 1.9%)
–> somewhat dampened growth rate

¤ “Industrial production operation”:
Oct 2018: +5.9 % in real terms compared to +6.2% in Oct 2017
–> surprisingly limited slowdown.

Indicators to watch also in 2019

Considering further growth indications, I would mainly look in 2019 at the trend of the banks’ cash requirements (further cuts) and speeches by Chairman Xi Jinping and Prime Minister Li Keqiang. A further weakening of the currency RMB – if happening – would point strongly at continuous tough times for Chinese exporters. And – finally – official statistics not to forget. If statistics even officially are on slight downward moves, such developments most probably reflect weakening trends.

Still quite high official growth objective for 2019 expected

GDP growth in 2018 will come in 6.6% – plus/minus 0.1. For 2019, I expect the official objective for GDP growth to be set between 6 ¼ and 6 ½ % or – if more exactly – at one of these range points. The new growth target for 2019 has certainly to be met just one year before the important evaluation year of 2020 for the 100^th anniversary of the Communist Party in 2021.

Any deviation from the “planned” GDP-growth range in 2019 would therefore be a surprise!

Hubert Fromlet
Affiliate Professor at the School of Business and Economics, Linnaeus University
Editorial board

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