Analysts claim that the economic health of China is in a far worse shape than is suggested by its economic figures even before the economy is to feel the complete impact of US tariffs.
A national inflation-adjusted growth rate of 6.8 per cent for the first half of the year against 6.9 per cent in the same period last year was issued by figures of the Central government.
However, close scrutiny of the local economic figures shows that there are signs of a broader slowdown and stagnation and even contraction in certain parts according ot a report published in the South China Morning Post.
According to the National Bureau of Statistics, in July, the official manufacturing purchasing managers’ index was 51.2 which is a five-month low for China.
A number of measures aimed at stimulating growth have already been announced by the Chinese government.
“The impact of the trade war [on China’s economy] is definitely negative, and the Chinese leadership at the Politburo meeting may discuss more fiscal spending and introduce more stimulus measures,” Iris Pang, Greater China economist for ING Wholesale Banking, said.
Economists have for long questioned the dependability of provincial economic data and a figure greater than the national figure emerges from the combination of the GDP figures of the provincial-level jurisdictions.
For the first six months of the year, only 15 of the 29 provinces did better in terms of the inflation-adjusted growth figures. For the same period a year ago, the figure was 21 provinces. During the period mentioned, those provinces that were found to be below the national average increased to 12 from 7. For example, only a 2.5 per cent rise in headline growth in the first half was reported by Jilin, a rust belt province bordering North Korea.
For the first half of the year, the national CPI inflation was at 2 per cent,.
The release of first quarter data was delayed by the Inner Mongolia province after the region announced conceded in January this year that it had inflated data on industrial output and fiscal revenues for 2016.
However, a very different picture is painted by the headline figures which stated that growth had slowed down to 7.6 per cent.
The GDP figures of the Chinese provinces help give a general idea about the progress of the economy throughout the country even though such figures are often considered to be less trustworthy than compared to the national data because of political intervention.
A “more proactive fiscal policy” was announced to be adopted by China’s State Council last week. it also announced the speeding up the process of raising of and spending of 1.35 trillion yuan for infrastructure projects by the local governments.
“The Chinese government has clearly shifted towards a more accommodative policy stance since the beginning of July … however, this shift is still very modest in comparison to previous easing cycles,” Michelle Lam, a Hong Kong-based economist from Societe Generale, wrote in a note.
“The most important difference is that policymakers are still trying to move ahead with leveraging reforms, even though they have recognised that the process needs to be softened and slowed.”
(Adapted from SCMP.com)