Economic recovery or not?

La vie en rose

Talking about China, especially about its economic health and political system, can sometimes be a joke when you don’t want to look in the mirror. Of course, looking at this country when you live in it or when you are outside, it gives you different views. However, we must not be fooled by the various forms of the numbing of the brain. In China, the economy’s dynamism, population, and optimism – well nurtured by harmonious official media – can lead us into a bubble. When one has interests, financial, family, economic, or otherwise, one is even more exposed to the risk of turning into a conscious or unconscious parrot of the Xinhua News Agency with a fanaticism appreciated by the most nationalistic fringes and which makes others laugh.

Black is black

On the other hand, outside China, where trains are not on time, far from the beautiful window, it is easy to fall into another bias. With the darkness that we like to crush in Western countries, we quickly see a China that has been in fall for decades. This kind of event also happens to Chinese people who seem to discover their country by listening to Chinese media based abroad. One kept telling me that you have to go to New York to find out what goes on behind the Chinese government’s scenes.
You add cream of ideological, left-wing or right-wing reading grid, and intellectual comedy can be in full swing, or rather it’s the burial of discernment. I don’t want to teach anyone a lesson, because we can all go through these states, me first, and sway from one to the other. This is why, on this site, I bring back voices from the various camps. Today, I am talking about Wang Jian’s program on China’s economic health. After having worked in China and Hong Kong, this financial journalist now lives in the United States where he can express himself more openly and his song is not from Beijing. Let’s first take a look at the official figures released last weekend.

Chinese consumption in the first half of the year: -5,9%

The National Statistical Office published consumption figures in the first half of the year. They amounted to 9,718 yuan per person and showed a decline of 5.9% (9.3% removing the price factor). Urban residents spent an average of 12,485 yuan (-8%, -11.2% adjusted) and rural residents spent an average of 6209 yuan (-1.6%, -6%).
Two categories of products showed an increase, one food-alcohol, tobacco with + 5% and the other housing + 3.1%. Clothing decreased by 16.4%, household goods by 6.4%, telecommunications by 10.7%, education and recreation by 35.7%, and welfare and medical expenses by 9.9%.

Consumption, expenditure by category, and proportion in overall consumption in the first half of 2020:

Corporate profits: -12.8%.

Corporate profits fell 12.8% in the first six months, public earnings by 28.5%, public corporations by 13.7%, foreign corporations (including those with Hong Kong and Macao capital) by 8.8% and private corporations by 8.4%.

June: improvement

June offers better prospects.
1. Sales of large industrial companies in June have recovered. Industrial value, after a 0.4% increase in May, rose by 4.8% in June.2. After the fall at the beginning of 2020, the Producer Price Index (PPI) is recovering, see illustration. 3. Cost prices are lower, thanks in part to the decline in the price of a barrel of oil. Out of 100 yuan, the fall in costs is equivalent to 0.22 yuan.
Producer Price Index (PPI) :

No rebound?

Wang Jian, an economic journalist, does not believe in China’s economic recovery, as the June data would indicate. Consumption is weak and foreign markets are not allowing the export sector to recover. How can we have an economy that is recovering? He doesn’t have confidence in some of the official figures. For example, in recent years, in 2018, customs started to use Chinese currency and not the dollar to indicate the amounts of foreign trade. It is more difficult to cross-check with data from other countries because of the exchange rate effect, which can be influenced in any direction. He noted other data that are little looked at and do not go through “harmonization”, such as transport figures. The first half of 2020 has a volume representing only 45.2% of the amount of 2019, and the month of June that would see a recovery records a volume of 68.8% of June 2019 within cities and 56.3% between cities. The journalist believes that it is far too early to talk about recovery. Many sectors had peaked in the years 2016-2017 before declining, the health crisis has only aggravated an economy in need of structural reforms.

Catastrophism without catastrophe

The economic and financial disaster on China has been going on for more than thirty years and no collisions have occurred. That the official figures are oriented for a beautiful aesthetic, I believe. For that, should we think that the situation is as bad as some circles say? No, that is not my opinion. No country is perfect. China is multifaceted. We have a China of cities and the eastern facade, with certain sectors – the digital – in shape. Chinese stimulus packages are there.
On the other hand, we have a China lagging with its 600 million people and their 1,000 yuan ($140) average monthly income. The Chinese economy is recovering? It certainly is! In small steps? There’s a good chance!

Sources:
National Bureau of Statistics.
Bureau of Statistics 2
Wang Jian Program

29 July 2020

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