Skip to main content

TRIVIUM CHINA: China Tip sheet



1.  Data dump – surprisingly decent monthly econ data

China’s stats bureau released August economic data this morning.

The numbers looked pretty decent,though the pace of overall growth remains very weak.

Retail sales grew at 9% y/y – up from 8.8% in July.Year-to-date retail sales grew at 9.3% y/y through August – the same rate as the first seven months of the year.Growth of industrial production inched up to 6.1% y/y – from 6% in July.But on a year-to-date basis industrial production decelerated to 6.5% y/y through August – a touch down from the 6.6% growth in the first seven months of the year.

Quick take 1: the improvement in consumption seems to have been driven by the purchase of oil products, gold and precious jewels, and daily necessities. Those purchases do not indicate a healthy consumer market.

Quick take 2: Industrial output was driven by an uptick in steel, cement, and aluminum – the first two of which will have been driven by solid property construction in August.

The upshot: Any data improvement is a good sign, but we don’t see August as an inflection point. Neither consumption nor industrial production look to be on a new accelerating trend.

NBS: 8月份国民经济保持总体平稳、稳中向好发展态势
NBS: National Economy Stayed Stable with Good Momentum of Steady Growth in August


2.  Infrastructure investment still weighing on growth

There was also a flicker of light on the investment side:

Year-to-date investment growth fell to 5.3% y/y – from 5.5% in the year-to-July.But in August alone, growth came in at 4.6%y/y – up from 3% in July.That occurred on the back of improved manufacturing investment, which accelerated in August.Infrastructure investment, however, fell further into negative territory, contracting by 4.3% y/y – down from a 1.9% contraction in July and average positive growth of 8.1% in the first seven months of the year.

Quick take: The investment numbers mirror the retail sales and industrial data – a surprising improvement, but we are not yet convinced this is a new accelerating trend.

Get smart: Infrastructure investment continues to weigh on overall investment and overall economic growth. The push to get local governments spending more, which started in early August, has yet to take hold. And as long as infrastructure spending is contracting, the economy is unlikely to genuinely turn a corner.


3. Local governments feel constrained fiscally

Why is local infrastructure spending still so weak? Because the central government is continuing its effort to control local debt.

Some context: The Party issued two policy documents earlier this year – one on thoroughly identifying off-balance-sheet debt and one imposing lifetime accountability for debt on officials. (see August 16 and August 28 Tip Sheet).

We are starting to see results.Local governments are paying back some of their debt by selling off more land.

And one local finance official had this to say:

[The local government] no longer wants to conceal the size of debt size."But per the previous entry, they have a difficult line to tread as the economy slows. In the words of another local official:"On the one hand, … it is necessary to borrow legally.""On the other hand, there are limited sources of funds.""We will strictly enforce the documents issued by the central government.""We are reducing investment projects. Investment must be done within our capabilities."

Get smart: With efforts to control local govt debt gaining steam, don't expect the economy to pick up.

21st Century Biz: 化解地方债风险:部分市县拟加快土地资产变现


4. Premier Li wants a fairer market

On Thursday, Li Keqiang paid a visit to the newly-created State Administration for Market Regulation (SAMR).

Some context: The SAMR is a new super-regulator, created as part of the MASSIVE government restructuring that took place in March. (To wrap your head around the restructuring, check out our sweet infographic.) 

Li told assembled regulators that they have to change their mindset:

“Your job is not to supervise the market by planning.”“China…cannot follow the old path of relying on investment and fiscal [spending].”Instead, China needs a more vibrant market environment:“Stimulating market vitality and fair regulation complement each other.”“If we don’t have fair regulation, then we will not have fair competition, …and that could allow rent-seeking and corruption to flourish.”

Get smart: Many of China’s market sectors are super inefficient, often because of administrative barriers. If the SAMR can succeed it reducing those barriers, it could provide a boost productivity.

Xinhua: 李克强:加强公正监管 营造公平竞争市场环境


5. Efforts to control SOE debt are ramping up

Yesterday, authorities published new measures to reduce debt levels at state-owned enterprises (SOEs).

We told you this was coming (see April 27 Tip Sheet).

What the new measures do:

“The average debt-to-asset ratio of SOEs should be reduced by 2 percentage points by the end of 2020, compared with the end of 2017.”“After 2020, the debt-to-asset ratio of SOEs should be kept at the average level of companies in the same industry with the same scale.”“Warning and monitoring systems for companies’ assets and liabilities should be established.”“A time limit should be set for companies with high leverage to reduce their debt-to-asset ratio.”“A clear boundary should be set to separate government debt from corporate debt, with local governments strictly banned from borrowing in the form of corporate debt.”

Get smart: That last point is important, and just one more reason why we should not expect a pick up in investment at the local level.

READ MORE 中共中央办公厅 国务院办公厅印发《关于加强国有企业资产负债约束的指导意见》 China lays out timetable for SOE deleveraging


If the Tip Sheet isn't the best thing in your inbox every day,
we'd like to know why.


Popular posts from this blog

SSG Commando Muddassir Iqbal of Pakistan Army

“ Commando Muddassir Iqbal was part of the team who conducted Army Public School operation on 16 December 2014. In this video he reveals that he along with other commandos was ordered to kill the innocent children inside school, when asked why should they kill children after killing all the terrorist he was told that it would be a chance to defame Taliban and get nation on the side. He and all other commandos killed children and later Taliban was blamed.
Muddassir Iqbal has deserted the military and now he is  with mujahedeen somewhere in AF PAK border area”
For authenticity of  this tape journalists can easy reach to his home town to interview his family members or   ISPR as he reveals his army service number”
Asalam o Alaikum: My name is Muddassir Iqbal. My father’s name is Naimat Ali. I belong to Sialkot divison (Punjab province), my village is Shamsher Poor and district, tehsil and post office  Narowal. Unfortunately I was working in Pakistan army. I feel embarrassed to tell you …

CPEC Jobs in Pakistan, salary details

JOBS...نوکریاں چائنہ کمپنی میںPlease help the deserving persons...Salary:Salary package in China–Pakistan Economic Corridor (CPEC) in these 300,000 jobs shall be on daily wages. The details of the daily wages are as follows;Welder: Rs. 1,700 dailyHeavy Duty Driver: Rs. 1,700 dailyMason: Rs. 1,500 dailyHelper: Rs. 850 dailyElectrician: Rs. 1,700 dailySurveyor: Rs. 2,500 dailySecurity Guard: Rs. 1,600 dailyBulldozer operator: Rs. 2,200 dailyConcrete mixer machine operator: Rs. 2,000 dailyRoller operator: Rs. 2,000 dailySteel fixer: Rs. 2,200 dailyIron Shuttering fixer: Rs. 1,800 dailyAccount clerk: Rs. 2,200 dailyCarpenter: Rs. 1,700 dailyLight duty driver: Rs. 1,700 dailyLabour: Rs. 900 dailyPara Engine mechanic: Rs. 1,700 dailyPipe fitter: Rs. 1,700 dailyStorekeeper: Rs. 1,700 dailyOffice boy: Rs. 1,200 dailyExcavator operator: Rs. 2,200 dailyShovel operator: Rs. 2,200 dailyComputer operator: Rs. 2,200 dailySecurity Supervisor: Rs. 2,200 dailyCook for Chinese food: Rs. 2,000 dailyCook…

Historical relationship between Kurd and Baloch.

The Kurds are the ethnical group living in a region known as Kurdistan which is divided into Iraq, Syria, Turkey and Iran. They  are struggling for an independent region since decades and they are famous for their female guerrilla fighters.        On 25 September 2017, the referendum for an independent Kurdish region  was held in Iraq with a turn out of 72 %.   On this important occasion, the historical relation between Kurd and Baloch people is worth discussing.       When it comes to history, every nation tends to find its roots and origin. Same goes with the Baloch people. The Baloch people are always curious  about  finding their roots in history. Even if you  talk to a shepherd in Balochistan, he will be curious to talk about his  tribal or ethnical roots.      The Balochs have always conveyed the history to the next generations in different mediums like poems etc. No Baloch before 20th century had written books on  history  or origin of the Baloch nation .