China growth cross-check

Lombard Street Research also thinks Chinese official statistics on price understate reality. They use a weighted average of the changes in CPI, fixed asset investment prices, export and import prices to arrive at their own GDP deflator which, when applied to the first quarter numbers suggests that GDP contracted 0.6 per cent on a quarterly basis in the first quarter and slumped to 4.4 per cent on an annual basis. [Link]

Shen added that Mizuho’s “Li Keqiang Index” – which is based on Premier Li Keqiang’s reported comment that rail cargo volume, electricity consumption and financial credit are truer references for China’s real growth rate than official statistics – is showing a sharper downturn than the official statistics suggest. [Link]

Almost all Chinese provinces failed to meet their growth targets in the first quarter even after scaling back their ambitions as the government instructs officials to focus on reining in debt and curbing pollution. [Link]

Yet, the Chinese government reported a GDP growth rate of 7.4% YoY in the first quarter of 2014! Most of us get to work and analyse it solemnly, upon receiving the news.

It is a very surreal world we live in – the world of China GDP, the world of US stocks valuation, etc.


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