Official China's third quarter GDP numbers released earlier today caused controversial reactions varying from shrugs to utter disbelief. Let us see why analysts have been so much confused.
The world’s second largest economy saw its growth expanding at 6.9% in the third quarter, below Beijing’s 7% target for the first time since 2009, but above forecasts for 6.8%.
For years analysts have been doubtful about China’s official data, but there was especially intense distrust on Monday.
Danny Gabay, co-director at Fathom Consulting, said in an interview with BBC Radio 4 that they do not believe them at all:
“It’s not just that they come in suspiciously close to the target, which is pre-set. They’re produced remarkably quickly and rarely revised. And our own estimate — which is based on Premier Li’s advice, which is that the GDP data are untrustworthy, that we should use alternative measures to gauge the level of activity in China like electricity use, credit growth and other domestic indicators — we combine those and we get a number closer to 3%. Not 7.3 – three!”
investment director at broker AJ Bell agreed:
“...underlying metrics suggest the real growth rate could be nearer 3%-4%.
If you look at growth in rail cargo traffic, electricity consumption and
demand for loans, three metrics favoured by Prime Minister Li, the
picture is not so healthy.
Credit growth still looks promising but
freight shipments and electricity demand growth look to be sagging, so
the so-called Li Keqiang index does raise a few questions. Today’s GDP
figures are encouraging but investors with exposure to China should
still expect some bumps and lumps along the way.”