While some say Thursday’s Chinese economic figures will certainly have been massaged by authorities, Standard Chartered has found some green shoots of optimism within the data released. In fact, the bank even asks if China could already be staging a recovery.
Just to recap, official figures showed GDP-growth slowed to 6.8 per cent in the fourth quarter vs 9 per cent in the third – in line with analyst expectations, but still a clear contraction.
But what about the loan growth figures? According to Standard Chartered these can certainly be interpreted as positive (our emphasis):
Loan growth exploded in Nov-Dec 2008, growing 18.8% y/y in real terms (assuming zero-inflation expectations) in December. We show this in Chart 1. It is hard to overestimate the potential importance of this. Mature economies’ banking systems are currently flooded with liquidity that is not being lent out. China’s interbank market is similarly flooded — but the difference is that the banks are lending. This will have prevented the feared pre-Chinese New Year credit crunch in the corporate sector, and it probably signals that the banks are ready and waiting to finance the stimulus package (as we argued in our Special Report on 21 January 2009, ‘Spend, spend, spend’).
So while western banks have stopped lending, it seems – according to the data – Chinese banks have not.
But there’s more.
The bank also points out that M1 and M2 growth have also recovered on the back of the loan numbers, while the M1:M2 ratio, which measures how liquid money is (and thus how ready it is to be put to use), has ticked up. This they say means the money numbers are pointing to a recovery early in 2009.
But there are another six points worth of good news too:
The December PMI ticked up to 41.2, from 38.2 in November. This was driven by small upticks in confidence across most of the components, including new orders, production, raw material inventories, purchases, imports, and prices.
Amid all the bad news coming out of the power sector, energy consumption rose month-on-month in December.
Retail sales growth in December remained robust, though it slowed a bit to 19% y/y nominal growth. Holiday sales during 1-3 January were reported to be strong. Although the retail data does not represent consumption, the fact that the trend is still positive is cause for cheer. All eyes on Chinese New Year retail data.
Crude oil import growth (in volume terms) remained positive in double digits in December, and oil product imports were very strong.
Residential house transactions have risen in all major cities in recent weeks. Measures introduced by Beijing in November to make mortgages cheaper and lower down-payment requirements seem to be filtering down as the major banks finally begin to cut their mortgage rates.
Inventories in some sectors, steel for example, are reported to have fallen. If destocking really is almost complete in some key sectors, as some claim, then this provides an important plank for a resumption of production in H1.
Time to celebrate and move to China?
Well perhaps not. Standard Chartered interprets the data overall as “confusing” saying the glimmers of good news still come among the very bad. The bad includes negative housing sentiment, awful real imports contracting some 19.4 per cent year-on-year, substantial upstream inventories, a continuing slide in fiscal revenue growth, key retail indicators (car sales and air passenger travel) deeper in the red.
As for number massaging, Standard Chartered says there are unsubstantiated rumours that a large chunk of the new loan growth in November-December was the result of banks putting off-balance-sheet loans back onto their balance sheets.
On the massaging front, Nouriel Roubini would certainly agree. As he writes in his latest post:
So the 6.8% growth was actually a 0% growth — or possibly negative growth — in Q4; and the Q1 figures look even worse. So China is in a recession regardless of what the highly massaged official numbers claim.
Related links:
Are things some really that bad in China? – FT Alphaville
When is Chinese GDP not Chinese GDP? – FT Alphaville
The Chinese devil wears prada – RGE Monitor
“[An] outright contraction in the Chinese economy is now at least thinkable” – John Authers / Short View