This growth indicator suggests China's economy is in trouble

Photo by Lisa Lake/Getty Images for HIT Entertainment

In what will do little to appease growing concerns over the health of China’s economy, the total volume of goods transported by China’s national railway network plunged by over 10% last year, the largest annual decline on record.

According to Reuters, citing Chinese business magazine Caixin, railway cargo volumes declined by 10.5% to 3.4 billion tonnes, following a fall of 4.7% in 2014.

Railway cargo, along with electricity production and bank lending, are used by many analysts to gauge the true health of the Chinese economy.

In 2007, Chinese premier Li Keqiang, then Party Committee Secretary of Liaoning, stated that the GDP figures in his province were unreliable, telling a US ambassador that he preferred to look at alternative metrics, such as railway cargo volumes, to determine what was really happening in the economy.

While the collapse in cargo volumes points to a significant slowdown in the Chinese economy, that’s not the view offered by the Chinese government.

In October last year China’s state-run People’s Daily newspaper stated that falling freight rail volumes were not due to declining economic activity, but rather an increase in green energy production reducing the need to haul coal across the country.

“The percentage of green energy consumed in China has increased in recent years,” said the newspaper.

“Eco-friendlier sources such as hydro, wind, nuclear and natural gas made up 16.9% of total energy consumed in 2014, a 3.5% increase compared to 2010. The development of new energy has reduced demand for both thermal power and coal.”

Between January and August in 2015, coal volumes transported by railway fell by 11.4%, leading to a 6.1% drop of overall railway freight, the newspaper said.

Whether true or not, or somewhere in-between, the view presented by the government is unlikely to fill many China watchers with confidence.

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