A raft of weak economic data out of China

Rob Schmitz Mar 14, 2014
HTML EMBED:
COPY

A raft of weak economic data out of China

Rob Schmitz Mar 14, 2014
HTML EMBED:
COPY

For three years in a row, there’s been weak economic data out of China at the beginning of the year. And each year, the best economic forecasters failed to predict how weak the numbers would be.

“This is the third year in a row this has happened. So why are we still being surprised by it?” says Andrew Batson, lead China analyst at Gavekal Dragonomics in Beijing.

He says part of the reason for the weak numbers is seasonal – the first few months of the year mark the end of the Christmas season, and China shuts down for Chinese New Year. But there’s a bigger, more important reason: “The momentum of the Chinese economy is much slower now than it used to be,” says Batson. “The second thing that’s happening is, essentially, the Chinese corporate sector is in a lot more financial stress than it used to be. Debt levels have shot up.”

Some blame China’s government for tightening up credit. But Anne Stevenson-Yang, director at J Capital Research, thinks it’s simpler than that. She says China’s economy is on life support.

“When you put more credit in, there’s a heart beat. When you don’t, there isn’t,” says Stevenson-Yang.  “So all those numbers are trending negative, and the question is: Is anyone willing to pump the machine again?”

So far, it’s not clear whether China’s central bank will loosen up credit. Economists say China needs to stop setting GDP targets – they put pressure on local governments to meet them by spending more. And one more thing, says Stevenson-Yang: China needs to accept it’s having a recession, and move on.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.