GDP Miss Shows Credit Growth Not Doing What It Should

China's real GDP growth came in at 7.7% y-o-y (year-on-year) in Q113, versus consensus expectations of 8.0%. Although official GDP figures are no great indicator of the health of China's economy, we take the relatively large 'miss' as a sign that the new leadership is willing to accept a slower headline growth rate.

This is the fifth slowest quarterly growth outturn in over a decade, and is concerning given the ramp up in liquidity seen over recent quarters ( see 'Inflation On Its Way But Not Here To Stay', April 11). The gap between credit growth and real GDP growth appears to be heading in the wrong direction, which is a natural consequence of the poor quality of investment that has been undertaken over recent years. We do not believe that this is the end of the China slowdown, and expect more downside surprises over the coming quarters. While our 2013 real GDP growth forecast of 7.5% may be a little on the bearish side, we continue to see the second half of the year throwing up more hurdles for China's investment bubble.

Less Bang For Their Buck
China - Real GDP Growth (% chg y-o-y) & Total Social Financing (CNYbn)

GDP Miss Shows Credit Growth Not Doing What It Should

China's real GDP growth came in at 7.7% y-o-y (year-on-year) in Q113, versus consensus expectations of 8.0%. Although official GDP figures are no great indicator of the health of China's economy, we take the relatively large 'miss' as a sign that the new leadership is willing to accept a slower headline growth rate.

Less Bang For Their Buck
China - Real GDP Growth (% chg y-o-y) & Total Social Financing (CNYbn)

This is the fifth slowest quarterly growth outturn in over a decade, and is concerning given the ramp up in liquidity seen over recent quarters ( see 'Inflation On Its Way But Not Here To Stay', April 11). The gap between credit growth and real GDP growth appears to be heading in the wrong direction, which is a natural consequence of the poor quality of investment that has been undertaken over recent years. We do not believe that this is the end of the China slowdown, and expect more downside surprises over the coming quarters. While our 2013 real GDP growth forecast of 7.5% may be a little on the bearish side, we continue to see the second half of the year throwing up more hurdles for China's investment bubble.

×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.

×

REQUEST A DEMO

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.

Thank you for your interest

A member of the team will be in touch shortly to arrange a convenient time for your free demonstration and trial. If your enquiry is urgent, please email our Client Services team here.