World Economics Thread

[bladerunner]

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IS THIS CAUSE FOR A REALITY CHECK? anyone
we had recently made comments on how well China is coping with this economic upheaval. Were we a bit premature?

The question of whether China is presenting a too rosy growth picture came from an interesting corner: the International Energy Agency.

The IEA said Beijing’s official 6.1% on-year growth in first-quarter gross domestic product didn’t tally with a 3.5% drop in China’s oil demand in the quarter and also cited “inordinately weak” electricity demand.

“Admittedly, pinpointing China’s oil demand with accuracy is an exercise fraught with difficulties, given the lack of data and the underlying assumptions analysts must make regarding stocks and refinery output from independent producers,” the IEA said in its latest report on the global oil market (available here, subscription required).

“Still, one would have expected stronger, positive oil demand growth commensurate with the reported economic resilience, unless income elasticities had drastically changed.”

The IEA floated another possibility: Real GDP data aren’t accurate and shouldn’t be taken at face value.

It cited analysis by one research firm: London-based economic consultancy Lombard Street Research, often found on the lower end of estimates of China growth. On China’s first quarter, Lombard Street said growth was “probably slightly negative or nil at best.” That’s a minority view, as many economists think that while growth in the fourth quarter of last year was likely overstated by official GDP figures, that’s less true of the improving first quarter.

And extrapolating from a volume indicator like oil or electricity use to GDP — a value-added measure — is not a straightforward process. Many economists think the disconnect between China’s measures of energy consumption and GDP reflects a sharper slowdown in energy-intensive sectors than in the overall economy.

“This analysis … is of course one set of opinions among many,” the IEA said. “However, its conclusions regarding China’s real 1Q09 GDP growth seem more consistent with oil demand estimates.” The agency said it was sticking with its forecast of a 0.9% decline in 2009 in China’s apparent oil demand.

China’s statisticians have defended the accuracy of their work.

–David Winning:coffee:

 

[bladerunner]

I havent been able to find any hard copy as of yet to verify this story., but I saw on The BBC business news that certain internationl rating agencys were concerned about the amount of money the Chinese Banks were loaning to their customers, with a large amount going to SOE's. Apparrently 750 billion was loaned in the last Quarter? ( jeez sounds a lot) and a fair chunk of it is going to SOEs that are loosing money faster than you can print it.
They predict Chinas could have its own banking Crisis if its not careful, and that the Central authorities are becoming increasingly concerned, because to generate more profit at these lower interest rates the banks are going to have to loan more money.
Sounds like a merry go round once you get on its hard to get off. But seriously unless Ive got it wrong the $750 billion that the banks have loaned, of which much is being lost, in the 1st quater, their 2 trillion surplus wont last long. and it could certainly derail Chinas growth big time, possibly worse than Japans?
Mind you it has happened yet, and it will be interesting to see how the rest of the financial world view this story in the oncoming months.
I don't know if we should just put it down to Western scaremongering as we did earlier on,as some hard numbers are beginning to emerge which don't look good. and with any stimulus package which is the drive behind this lending, there is always a down side.

 

[kliu0]

deleted

 

[bladerunner]

The Last half of Kiliu0's posted article reinforces some of the concerns that Western economists say are or will affect the Chinese Banks engaged in this liberal lending process.

 

[pla101prc]

I havent been able to find any hard copy as of yet to verify this story., but I saw on The BBC business news that certain internationl rating agencys were concerned about the amount of loans the Chinese Banks were loaning to their customers, with a large amount going to SOE's. Apparrently 750 billion was loaned in the last Quarter? ( jeez sounds a lot) and a fair chunk of it is going to SOEs that are loosing money faster than you can print it.
They predict Chinas could have its own banking Crisis if its not careful, and that the Central authorities are becoming increasingly concerned, because to generate more profit at these lower interest rates the banks are going to have to loan more money.
Sounds like a merry go round once you get on its hard to get off. But seriously unless Ive got it wrong the $750 billion that the banks have loaned, of which much is being lost, in the 1st quater, their 2 trillion surplus wont last long. and it could certainly derail Chinas growth big time, possibly worse than Japans?
Mind you it has happened yet, and it will be interesting to see how the rest of the financial world view this story in the oncoming months.
I don't know if we should just put it down to Western scaremongering as we did earlier on,as some hard numbers are beginning to emerge which don't look good. and with any stimulus package which is the drive behind this lending, there is always a down side.

impossible, in the short run at least. there is a difference between borrowing money to build stuff because you dont have it, and borrowing money to build stuff because you think its value is gonna appreciate later

 

[kliu0]

deleted

 

[bladerunner]

Yes that the one.

 

[bladerunner]

double posted my internets playing up damn

 

[RedMercury]

Finally, somebody explains what happened to Zimbabwe. Also a great article on its own about money supply.

I wonder if a well regulated central bank and smart currency controls was the real secret to China's recent prosperity.

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[kliu0]

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