China released data earlier this week that confirmed an economic slowdown. Q2 GDP growth decelerated 7.5% from from 7.7% the previous quarter. The government has an official growth target of 7.5% for 2013.
Some sceptics argue that the GDP numbers were almost too perfectly in line with targets and could be hiding a much worse underlying story.
“I am probably not the only market commentator to find the China economic data curiously stable compared to the data volatility seen in developed economies,” said Societe Generale’s Albert Edwards in a new research note. Here’s more:
“Monthly series like retail sales, industrial production, fixed asset investment and even the official PMI tend to move in a glacial fashion on a month-to-month basis. (Recent volatility in the trade data is due to the authorities clamping down on accounting arbitrage/irregularities). Either China is the most well-managed economy in the world or the data reporting is the most well managed in the world.
“We all know though about the shortcomings of the official GDP data which the current premier Li Keqiang) described in 2007 as man-made and for reference only. Clearly this is also a heavily smoothed series. Do we really believe real GDP slowed to 7.5% from 7.7% in Q1 and 7.9% in Q4 last year? If so, it is about as interesting as watching paint dry.”
Edwards included this chart of GDP growth volatility for other major economies. China seems suspiciously low.
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