I think their GDP growth has to be taken with a HUGE grain of salt. But regardless, I don't think the GDP matters much at all.
First, it is a long-established tradition in China to report overly glowing statistics, even if you have to flat lie about things. My guess is that if you multiply reported GDP by 0.5 or less, that will get you much closer to the truth.
Second, the Chinese have a tendency to run things until the wheels fall off without due regard to the dynamics of markets. So, if building 10 new apartment high-rises is profitable, then building 10,000 new apartment high-rises should be 1000 times as profitable, and so on. So I have to wonder how much of the reported GDP growth might end up being paradoxically counterproductive in the long run.
Third, as is the case in the US, there is horrible unemployment in China, and actually it is much worse there. In part, this is because a lot of our unemployment has essentially been outsourced to China......you may find THIS eye-opening, albeit not the usual highly misleading picture you get of China:
hulu.com
But in any event, high unemployment does not bode well for consumer spending (although admittedly, consumer spending does not have nearly the impact on the Chinese economy that it does on the US economy).
But the above are all macroeconomic factors. In my view, regardless of the macroeconomics, the chart is irrefutable. To the best of my knowledge, there has never been an exception to the general "rules" governing the disintegration of a market after an asset bubble has formed. And, we all know that markets can and frequently do defy economic realities. So I conclude that whatever the Chinese GDP does, it really won't matter much to the markets, which are in a relief rally in the context of a long-term unwinding of an asset bubble (i.e., a long-term secular bear market).
Also: note very clearly that from mid-2001 thru mid-2005, China's GDP was growing steadily, and even in double digits. Nevertheless, that didn't matter at all to the equities markets. Instead, during this time the Chinese stock markets were locked in a 4-year bear market that saw the Shanghai Composite lose about 55% of its value.
So basically, I conclude that it doesn't matter what the reported Chinese GDP is, or how accurate that figure is. The Chinese markets are very clearly headed down in the long term. In the short to medium term, there is an outside chance we could see the previous highs revisited (about 3400), and if so, that will be an unparalleled shorting opportunity. I believe the US equity markets will rally through most of the rest of the summer, and that the Chinese markets will follow suit (the Asian markets do not lead NY, they follow NY). I also believe that later in the summer the US markets will begin a long and very painful bear market that will see the March 2009 lows revisited, and that support will not hold. During this time, the Chinese markets will continue their downtrend, and eventually reach the 900 - 1200 level.
WS |
