China: Do The Maths On 2014 GDP Growth

Business, China, Company Strategy, Economics, Polyolefins


By John Richardson

DO the maths and you should be able to assess what could happen to China’s GDP growth in 2014:

  • The Chinese Academy of Social Sciences wrote last week in the China Daily: If the PBOC loosens monetary policy to push down borrowing rates, it will have to achieve total social financing – a broad measure of liquidity – of more than Rmb 19 trillion ($3.14 trillion) to support GDP growth of 7.5%. But that amount of total social financing would represent 12% year-on-year expansion, much faster than last year’s gain of 9%.  An increase of that scale will cause massive macroeconomic risk, because non-performing loans will pile up faster and the goal of reducing the economy’s reliance on credit-fuelled expansion will recede even further into the distance.  To have more sustained and quality growth, we’ve got to let the growth rate go down. In other words, you have to pump ever-more air into the bubble just to keep it at the same level of inflation. Reduce the air supply – or even maintain the air at its previous level – and growth, potentially, falls of a cliff. 
  • But the FT’s Beyondbrics blog  estimates that credit growth could be as low as just 5% in 2014 (if the trend turns out to be your friend this would continue the deceleration in lending that occurred H2 last year – see the above chart).
  • The People’s Bank of China is giving every indication that it wants to crack down on speculation in 2014 and, thus, reduce credit creation.

Every chemicals and other company must, therefore, factor in the distinct possibility of GDP growth much lower than any of the current consensus forecasts.

How low? As we said, the maths has to be done based on the assumptions above and will lead to estimates a lot lower than the 6-7% being forecast by several polyolefins producers.


China Targets Trade Finance


By John Richardson AT the high inflation point of any financial bubble, you tend...

Learn more

China: One "Blink" And We Are Back To Normal


By John Richardson Temporary factors might be behind the weakness in China’...

Learn more
More posts
Focus of petchems business must be on meeting medical and food needs

By John Richardson SEVERAL contacts have said to me over the last two weeks that increased medical a...

Be very, very cautious about buying into the idea of a Q2 crude price rally

By John Richardson IT IS the unprecedented nature of the demand shock that’s the thing, regardless...

No business as usual despite re-ordering of global polyethylene competitiveness

By John Richardson THERE ARE sadly no business as usual scenarios, in my view. Under normal circumst...

China: temper your expectations of a H2 recovery for supply as well as demand reasons

By John Richardson CHINA IS gradually getting back to work, but only gradually because the governmen...

Petrochemical feedstock purchasing managers: What to think about and what do next

By John Richardson ALL THE old assumptions about how oil, feedstock and petrochemicals markets work ...

Vital work to maintain petrochemicals supply for essential services must continue

By John Richardson INDUSTRY associations around the world are lobbying governments about the importa...

Polyethylene: How to plan sensibly as we face threat of new Global Depression

By John Richardson I SINCERELY want to help you guys. That’s what I am here for. To this end, here...

Coronavirus may take as much as two years to be brought under control

By John Richardson The only honest answer is that none of us know how events will turn out because o...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more