China’s infrastructure lending jumps $1.1tn before Congress

Economic growth

SHARE THIS STORY

China lend Oct12.pngIts never easy interpreting China’s statistics. Partly this is due to the sheer impossibility of producing accurate numbers in an emerging economy. It is also made difficult by the fact that as the incoming premier Li Keqiang noted some years ago, its GDP statistics are “man-made and therefore unreliable”.

This doesn’t mean, however, that China’s announced 7.4% GDP growth in Q3 is necessarily wrong. But it does need to be considered alongside other evidence from statistics that Li has called reliable. As shown in the chart above, these suggest the picture is more complex than first meets the eye:

• Electricity consumption (green line) grew just 3.5% versus 2011, and only 2.9% in September
• Until last year, it was growing at higher levels than GDP
Major user demand actually fell 0.1%, and industrial use (70% of total demand) rose only 1%

• Bank lending (red column) has been rising, up 15% this year versus 2011
• Q3 lending was up 24%, maintaining the pick-up since Q2
• This seems to have been focused on the State-Owned Enterprises

The electricity data certainly seems in line with reports on the ground of slow growth in the private sector. It is also supported by the very slow growth seen in polyethylene demand. Normally this should equal GDP, but in 2012 it has been up just 2% versus 2011.

It therefore seems likely that the growth in lending has a political focus, ahead of next month’s Party Congress to appoint new leaders. Loans into the real estate sector were up 29% on Q2, whilst Rmb 7tn ($1.12tn) of loans have been approved since May to support local government infrastructure spending. This is ~15% of total annual GDP.

But this lending will have done nothing to support the announced policy transition towards increasing personal consumption. This is supposed to be the key focus of the 12th Five Year Plan which runs to 2015. But consumption’s share of GDP actually fell to 4.2% by end-Q3 versus 6.4% in Q1 – the lowest since Q3 2009.

As a commentator in China Daily noted, “fundamental change is easier than done“. And he warned “the new leaders will have to make tough choices quickly if they are to alter the direction of the country for the better“.

PREVIOUS POST

Companies need to plan for slower global growth

31/10/2012

As promised, the blog looks today at the business implications of population age...

Learn more
NEXT POST

US Federal Reserve policies confront a closing door

03/11/2012

The blog’s friends at the American Chemistry Council used a very relevant ...

Learn more
More posts
Debt, deflation, demographics and Brexit set to challenge London house prices
17/05/2020

London property websites haven’t used the word “reduced” for many years. But it...

Read
The bill for two decades of doomed stimulus measures is due
03/05/2020

The Financial Times kindly made my letter on the risks now associated with central bank stimulus the...

Read
Local supply chains replace global trade as world starts to “do more with less”
26/04/2020

Something quite dramatic is happening in the global economy.  Of course, Wall Street analysts still...

Read
Financial markets enter their Convulsion phase
19/04/2020

Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen afte...

Read
World risks moving from Denial into Anger as the Paradigm of Loss moves forward
12/04/2020

The head of the IMF has warned again on the likely scale of the economic depression ahead: “Gl...

Read
The world has wasted 3 months – there is little time now left to avoid a Covid-19 catastrophe
05/04/2020

It is now 3 months since China’s state television broadcast the first news of the Wuhan virus,...

Read
A new recession era to emerge
22/03/2020

Contingency planning has become mission-critical. The longer the coronavirus pandemic continues, the...

Read
Chain’s smartphone and auto sales tumble as coronavirus hits demand
08/03/2020

China is the world’s largest market for smartphones and autos – responsible for c30% of ...

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