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)|