The myth of the Chinese soft landing

Blog 17 aug  2011.002.jpg

The Top 10 of rarest things in the world ?

10. Fine German restaurants

9. Humor and self-criticism

8. Safe biking lanes in Flanders

4. Proposals for public expenditures cuts in Belgium (as part of the 10Bn€ effort)

3. Reliable US statistics

2. Reliable Chinese statistics

1. Real Triple-A (AAA) countries

Last year, reliable Chinese statistics topped the list, but there are now at least 2 reliable Chinese statistics and -unfortunately- only 1 AAA country.

The two reliable Chinese statistics are : 1. Power output (electricity) 2. Money supply

Forget most of the other data in China: GDP numbers for instance are notoriously unreliable. The rumours of an economic slowdown in China have been circulating for a while. Idle buildings and capacity overhang are some of the warning signs of the Chinese economy.

But now a new and more alarming warning sign has turned on: money supply has collapsed in recent quarters. The growth of money supply is closely related with credits and hence infrastructural activity and fixed investments in general. The Chinese banks have put the brake on new loans, and as a result, activity will start to slow more markedly in coming months.

Analysts have so far stated that China will experience a soft landing. But the chart is a serious indication that there is no such thing as a soft Chinese landing.

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If you are in an inspirational mood, you may fill in the missing blanks (7-5) in “the rarest stuff on earth” list.

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This article was written by Geert Noels

on 19 October, 2011 about China

Geert Noels is a macro-economist and a much sought after commentator on financial and economic matters. After 15 years working as the chief economist with a financial institution, he founded Econopolis in 2009. He described his view of the financial-economic future in his best-selling book Econoshock, awarded the ABN-AMRO public prize for the best non-fiction book. The content of that book is the basis and guiding principle for the strategies of Econopolis.

 

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