Thursday, April 16, 2009

China's Q1 figures

These days China's numbers matter as much, if not more, than America's numbers. There was therefore more than the usual interest, when China announced its Q1 numbers yesterday.

GDP grew by 6.1% compared to Q1 of last year. This was greeted with some disappointment by the markets (who only react against expectations and not against reality !) This is actually very positive. Firstly, 6% is nothing to sneer at - every other country in the world would give an arm and a leg to grow at 6%. Secondly, on a quarter on quarter annualised basis, this is 6% against a virtual stalling last quarter as The Economist has analysed. So there are some signs that the worst is over, at least here.

On the positive side, retail sales grew by 16%. Fixed investment grew by 30% - the government's stimulus is starting to kick in). But on the negative side exports were down by 17%.

Actually China is not as dependant on exports as is made out to be. Only 10% of the jobs are in the exports sector. Although exports account for 40% of GDP, the value added (net of imports) is only 18%.

So here is my take on the China numbers

  • Growth is actually good, and forget whether it was dot on with expectations.
  • Growth is being led by domestic consumption and investment, making up for poor exports (isn't this what the world has been clamouring for ?)
  • Massive infrastructure spending and investment is happening - Will all this be really productive or will they be bridges to nowhere ?
  • If you look objectively, China was overheating in the past and is now on a more even keel.
  • The worry continues to be the banking sector. Massive lending for investment has happened. How much of this will truly yield returns. I know the published percentage of non performing assets is not high, but I am almost sure this is hugely understated.
  • The story that there will be social unrest if 8% growth is not achieved in bunkum. I simply cannot relate to this logic
  • Inflation in the medium term is a real real threat. God help if commodity prices around the world (especially oil prices shoot up).

One other thought struck me. Its only Apr 16. How come such numbers come out so early. Many companies cannot meet such a deadline. But a whole nation - and that too as huge as China?

There's just a nagging feeling at the back of the mind. Government numbers (everywhere) aren't audited. And you know that old adage - lies, damn lies and statistics !!