The highly anticipated economic growth data for China are out, and while markets are celebrating the prospect of more stimulus, analysts — including
Official figures released Tuesday showed China’s GDP growth dropped to 6.8% in the fourth quarter and to 6.9% in 2015 as a whole. Those readings marked theslowest annual pace of expansion in 25 years, and a larger-than-expected slowdown in the world’s second largest economy.
But in an interview with CNBC, Faber — publisher of The Gloom, Boom & Doom Report — said the Chinese economy isn’t at all growing as fast as the country’s government suggests. Instead, the investor known as “Dr. Doom” puts the growth figure at about 4%.“An economy is very complex, and you have some sectors of an economy expanding and some sectors contracting [...] My sense is that at very best, the economy is growing at around 4% per annum, but it could be lower,” Faber said in the interview.
The investor cited concerns about China’s “colossal debt bubble” and slowing exports as the basis of his more-downbeat assessment.
Other analysts agreed that China’s growth numbers could be inflated and underlined the outlook for continued slower growth. Here are some of the initial reactions:
“As is always the case with Chinese data, there are both positives and negatives to take away, while the question of reliability always hangs over the numbers [...] While the figures will undoubtedly be called into question and the slowdown in other key sectors have been a factor, we should take comfort from the fact that the economy is transitioning away from manufacturing and exports and towards consumption as planned and still performing well in this challenging global economic environment.” — Craig Erlam, senior market analyst at Oanda
“If China is slowing down, it raises the question of whether the authorities will be tempted to let the renminbi slide yet lower, giving a boost to Chinese manufacturers but potentially exporting deflation to the rest of the world. Second, any Chinese slowdown only points to the elephant which is still in the room, namely debt. This isn’t just a Chinese problem, it is a global one, but core Chinese debt (loans to the non-financial sector) has mushroomed from 187% of GDP to 244% of GDP since the end of the great financial crisis in 2009.” — Russ Mould, investment director at AJ Bell
“China is in a funk because of the huge debt built up in 2008 onwards as it fought off the effects of the global financial crisis, but markets are excited because China may instigate stimulus to counteract slowdown fears. That can only mean more rate cuts or reductions in the required reserve ratio for banks. There is also scope for the currency to take some of the strain, but not yet, given the recent developments and especially on the offshore yuan.” — Simon Smith, chief economist at FxPro
“The data was not a surprise. In the quarters ahead we would expect China’s growth to continue to slow as structural forces dictate a lower trend rate. The volatility of markets has raised questions about currency pegs — Hong Kong and Saudi Arabia both being mentioned. It is worth remembering that pegs are political not market decisions, and we do not expect the pegs to break.” — Paul Donovan, global economist at UBS
“With China GDP growth below the golden 7% yearly target, the visible economic slowdown may have further elevated investors’ fears towards the failure of a series of aggressive measures by Beijing to revive growth and as such may reinforce the bearish sentiment towards the Chinese economy.” — Lukman Otunuga, research analyst at FXTM
“While the economy is overall still in what could be called a soft landing, the state of manufacturing is close to what we would say is a hard landing. This is why what may be a soft landing for China is in many parts of the world being felt as a very hard landing. This is especially the case for commodity exporting countries like Brazil and Russia. Countries that export more to the service sector on the other hand will not feel the slowdown as hard.” — Allan von Mehren, chief analyst at Danske Bank
- Source, Market Watch