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Beware the Waking Dragon
GDP up by 5.7 per cent in April-June quarter
India’s Gross Domestic Product increased by 5.7 per cent in the April-June quarter, up from 4.6% in the previous quarter. Growth in this quarter was the highest since March 2012, and it was sparked by a boost in the manufacturing and service sectors. However, economists said that this rebound could be temporary and stifled by poor monsoon rains and rising food inflation.
via Scroll.in – News. Politics. Culture..
This article ends on a high note: “Finally, and perhaps most important, China’s top leaders announced after a key meeting in December that from now on local officials’ performance will be evaluated on several criteria, including controlling debt and maintaining a better local environment, rather than just achieving high GDP growth.”
As China released gross domestic product and other economic statistics earlier this week, a perennial question has once again been raised: To what degree can the numbers be trusted?
Or as the Xinhua News Agency put it on Jan. 23: “One plus one equals two. But it’s not always the case, especially when you are talking about the calculating of local and national gross domestic product GDP data in China.”
What raised eyebrows was that the national GDP number came in below the figure one gets from totaling all the provinces’ GDPs. That presents, as Xinhua said in its unusually acerbic piece, “a somewhat peculiar math problem.”
While China’s official GDP in 2013 amounted to 56.9 trillion yuan ($9.4 trillion, up 7.7 percent from the previous year), the aggregate of all the provincial figures was about 2 trillion yuan more. And that’s not including three provinces (of 31 regions reporting), which have yet to publish their GDP numbers, according to Xinhua.
While this has “aroused suspicion among Chinese netizens that some growth-obsessed local officials have cooked the books,” (quite likely, Xinhua says later in its piece) there are other reasons for the discrepancy, the article explains.
One important reason: overlapping calculations, particularly when companies have businesses extending across different provinces. “Unlike the calculation of the nations’ GDP, where you have customs to clearly define the attribution of added value, it is very difficult to define which part of added value belongs to which provinces,” explained Cong Liang, an official with China’s state planning agency, who spoke at a press conference in Beijing on Jan. 22 and was quoted in the article.
via China’s Latest GDP Numbers Are Under Scrutiny From Xinhua – Businessweek.
The Times: “Fund managers who between them control more than $1 trillion in assets were warned yesterday that China was in the grip of a debt addiction that could destabilise its financial system.
Speaking at the annual CLSA China Forum in Beijing, Francis Cheung, the brokerage’s China head, said that the country was hooked on an “unsustainable” pace of growth requiring ever-greater injections of debt to keep going.
Fifty per cent of the Chinese econ-omy is made up of investment, an unprecedented level for a country at its stage of development, sucking in increasing amounts of credit, effectively to buy growth.
Total debt in the world’s second-largest economy soared from 148 per cent of gross domestic product in 2008 to 205 per cent of GDP last year and is expected to hit 245 per cent by 2015, Mr Cheung said in a report.
But despite the rising tide of investment being poured in to build everything from houses and roads to railways and power plants, China’s credit habit is becoming less effective, with the same amount of debt generating lower returns every year.
China’s annual GDP growth has almost halved from 13 per cent in 2007 to an expected 7.5 per cent this year, while total debt has more than doubled in the same time, a development model that President Xi Jinping also has called “unsustainable”.
“China is running just to stand still … China is not a rich country; it is a lot of debt for a country at this GDP level. What I worry about is unregulated lending,” Mr Cheung told the forum.
With Chinese industry suffering from overcapacity in every sector from steel to cement to solar panels, the country “cannot use any more stimulus policies to boost growth”.
The fastest-growing debt is that shouldered by local governments, with the undisclosed sum estimated to have hit 20 trillion yuan (£2 trillion) last year — a doubling in two years. Local governments are being forced to pay more to service their debts, while their ability to raise money through selling land is slowing.
The biggest risk, Mr Cheung said, came from the growing use of unregulated loans generated by “trust companies”, financial sector intermediaries that make money from offering risky loans known as “wealth management products” to private companies unable to get credit from state-run banks.
A report published by Moody’s yesterday found that China’s “shadow banking” sector had hit an estimated 29 trillion yuan (£3 trillion) last year, posing a “systemic risk” to the financial system, despite a partial clampdown in March. The credit ratings agency also warned of the threat of contagion, stemming from little-regulated shadow lending that has swollen by 67 per cent in the past two years.
Last month China sudffered its first sovereign credit rating downgrade in 14 years as Fitch lowered its appraisal amid fears that its debt problems would necessitate a government bailout.”
via An addiction that could spell economic disaster | The Times.
continuously updated blog about China & India
continuously updated blog about China & India
continuously updated blog about China & India
CHINDIA ALERT: You'll be living in their world, very soon 