Today, just two weeks after the end of the June quarter, China will release its second quarter GDP statistics. It’s a miracle of statistical compilation.
So let’s look at China’s GDP. It should come in comfortably around 7.5%. That’s the current official target for China’s ruling Communist party. And given the statistician has just two weeks to compile a vast amount of data, it’s fair to say they probably start at the end point and work backwards to get the desired result. Although we wouldn’t be surprised if the number comes in slightly under the official target to signify a weakening of future growth.
In fact, Chinese officials are already preparing the markets for a lower growth future. Last week, China’s Minister of Finance said that economic growth of 7% or even 6.5% wouldn’t pose too much of a problem for China. That’s prepping the market for lower future growth.
But the Ministry of Propaganda wasn’t too comfortable with such candid rhetoric. Over the weekend, China’s official Xinhua News Agency corrected Lou Jiwei’s quote and reaffirmed China’s official 7.5% growth target. Gotta keep the confidence up…because the only thing to fear is fear itself, right?
This tells us there is still quite a tug-of-war going on in China between those who recognise the need for economic rebalancing and those whose wealth and power rely on the status quo. There is no doubt that China’s economy could keep growing at 7.5% for another few years, but it would set itself up for an almighty bust if it did.
Having just gone through the biggest credit boom in modern economic history, it’s probably already too late to avoid the bust. But at least China’s new leadership understands that their longer term survival depends on managing the coming bust as best as they can.
So today’s number, whether it comes in bang on target or a little below or above, is meaningless. Because history tells you that all credit booms end in periods of sub-par economic growth. What’s sub-par growth for China — 5%, 4%? That’s sounds about right to us, and in 2014 that’s what we think you’ll see.
for Markets and Money Australia
From the Archives…
The Agonists and the Ecstasy of the Financial Market
12-07-13 – Dan Denning
A Two-Faced Shock for the Australian Economy
11-07-13 – Dan Denning
Asiana Boeing 777: Lifesaving Defence-Tech ‘Miracle Materials’ in Action
10-07-13 – Byron King
Interest Rates: Something Wicked This Way Comes
9-07-13 – Bill Bonner
The End of a Share Market Correction… or the Beginning?
8-07-13 – Dan Denning
- Watch out! Trouble in this debt-fuelled market could spark a worldwide financial panic: Stocks won’t be the only markets that crash as Global Financial Crisis 2.0 sweeps across the planet. There’s another, multibillion dollar credit market relied upon by companies — as well as local, state and national governments — that’s poised to collapse once the credit bubble pops. And the fallout could severely impact your wealth.
- The presidential decision that paved the way to our six decade-long debt binge: Australia — and the rest of the world — is living a lie. Debt has funded our lifestyle, NOT production and savings. Today’s global debt stands at $200 trillion. That scary number is the official debt level. The real debt tally will spin your head…
- What happens when Australia’s gigantic credit bubble goes ‘pop’: We’ve experienced two previous credit bubbles from 1880–1892 and 1925–1932. The current credit bubble has been building since 1950. A 65 year build-up. What happens when this bubble finally pops? As Vern will show you…it’s not pretty.
To download your free report ‘Global Financial Crisis 2017: Three Crisis Scenarios, and How They Could Impact on Australia’ simply subscribe to Markets and Money for FREE today. Enter your email in the box below and click ‘Send My Free Report’.
You can cancel your subscription at any time