Want To Keep Your Job? What To Tell Your Boss

China, Company Strategy, Economics, Europe, Oil & Gas, US

China-credit-growth

By John Richardson

THE economic data on China was very useful yesterday if you had already gone long on oil or US equities.

Both crude and the S&P 500 rallied on positive interpretations of Q3 GDP and industrial production data, which included the following:

  • “China’s gross domestic product increased by 7.3% in the third quarter, compared with 7.5% in the previous quarter,” wrote the New York Times. “While that was the lowest quarterly growth since the depths of the financial crisis in 2009, the rate remains the envy of major economies. The economy also continues adding jobs at a good clip, and the currency is one of very few that are still rising against the dollar,”the newspaper added.
  • “Chinese Industrial Production rose to 8.0%, from 6.9% in the preceding month. Analysts had expected Chinese Industrial Production to rise to 7.5% last month,” wrote Investing.com.

But if you want to keep your job in the chemicals company that you work for, the above kind of interpretation is of no value.

The first step towards getting the right picture would be to read the above New York Times article in full. It is a good example of the ambiguity and  confusion out there, when the author adds: “Chinese inflation is at its weakest levels in nearly five years. Commodity prices are plunging. New home sales are declining. Foreign investment is contracting.” This should set  your alarm bells ringing.

But, of course, the last thing that anyone wants when they are making budget projections is ambiguity. How on earth do you plot ambiguity on a spread sheet?

The good news is that the chart at the beginning of our post today offers absolute clarity in where China is heading. It is from JP Morgan’s chief China economist Haibin Zhu, who has revised down expectations for total social financing (TSF) for the whole of 2014 (TSF is the measure for all lending in China’s economy, via both its official and its shadow lenders).

If growth in new credit slows down, in line with his revised forecast, Zhu says that this would be the first year on record that it has done so. Last December, we predicted that credit growth would very probably slow in 2014.

Here is a further reminder of why credit creation is so crucial for understanding what is happening with “real growth” in the economy:

  • In January, the Chinese Academy of Social Sciences, a government-run think tank, said that TSF would have to rise by 12% in 2014 if the economy was to achieve its same rate of growth as in 2013.

If you want to keep your job you should, therefore, tell your boss that this must mean that “real growth”is far lower than the headline GDP number indicates. This will help you plan your budget for what remains of Q4.

What about next year? You need to tell him:

1.)    It is going to get worse in China before it gets better.

2.)    China is at the centre of the Great Unwinding. We are at the beginning of a new global economic crisis.

PREVIOUS POST

No Other Choice But To Tackle "Group Thinking"

21/10/2014

By John Richardson WE are proud to work with Paul Hodges, chairman of the UK-bas...

Learn more
NEXT POST

Thirty Reasons Why Ethylene Will Not Be Tight Until 2019

23/10/2014

By John Richardson THERE is a very common view out there that the ethylene cycle...

Learn more
More posts
Global polyethylene oversupply, the highest in 19 years, hasn’t gone away
03/07/2020

By John Richardson BRENT crude futures surged by 80% during the second quarter and enjoyed their bes...

Read
China could be in complete polypropylene self-sufficiency by 2022
28/06/2020

By John Richardson SORRY to labour the point but this comes from a genuine concern for the readers o...

Read
Asian polyethylene price recovery faces multiple challenges
25/06/2020

By John Richardson THERE are reports of significant cuts in Middle East polyethylene (PE) operating ...

Read
China’s long-term ambition for paraxylene self-sufficiency seems close to being realised
21/06/2020

On Friday, I examined how China’s paraxylene (PX) net imports could fall to as little 8m tonne...

Read
China’s big declines in 2020 PX and PP imports: the impact on its major trading partners
18/06/2020

By John Richardson CHINA’S refineries and petrochemicals plants came roaring back to almost fu...

Read
Paraxylene demand collapses as higher China production threatens 6m tonne fall in imports
15/06/2020

By John Richardson DON’T SAY I didn’t tell you that a decline in stock markets would happen. The...

Read
Coronavirus will severely damage the developing world unless we take the right steps
12/06/2020

By John Richardson IT IS a fantastic achievement. “Over the last 25 years, more than a billion peo...

Read
Main Street versus Wall Street and the crisis in the developing world
10/06/2020

By John Richardson RISING equity and oil markets do not necessarily point to a V-shaped recovery. I ...

Read

Market Intelligence

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

Learn more

Analytics

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