China Gets New Spring in its Roll

It’s like the cherry blossom on the trees has just opened, Shanghai has get a new spring back in its step and it’s on a roll. There on a spring roll. At least, that’s what we are being told. Whether we believe it or not, is entirely another matter. The art of autosuggestion or the positive-thinking theory can do wonders. Imagine a whole nation of psychological thinkers pooling thoughts at the same time. More than 1.361 billion people using the Caué Method, chanting together in union that the Chinese economy is on an upturn now. Any idea that is the sole occupation of a mind will become reality according to the theorist Emile Caué. Figures released today by China show that the Chinese economy has had probably the quickest turn-around in history going from contraction to upturn in just a few weeks or months. It’s amazing what positive-thinking can do.

Data released today by the Chinese administration shows in an upbeat way that the economy is getting better there. Growth may have been slowing down for two years but contraction has only been recognized for a short period of time.

Chinese Industrial Output

Chinese Industrial Output

  • Now, industrial output has soared by 9.7% (July) in China in comparison with a year ago. June’s figure stood at 8.9%.
  • Retail sales also increased by 13.2% in July (although expectations had been estimated at 13.5%).
  • This figure is just below the June 2012 to June 2013 retail-sales figure of 13.5%.
  • These figures are to be taken with the trade figures released yesterday showing a 5.1%-increase in exports in comparison with last year.
  • Exports fell by 3.1% in June.
  • Imports also were said to have increased by an astonishing 10.9% in July with regard to July 2012.
  • They had fallen by 0.7% in June 2013.
  • Consumer prices were stable at +2.7%, which was exactly the same in June 2013.

    Chinese Retail Sales

    Chinese Retail Sales

The increase in industrial production is the highest increase that has be seen for five months in China.

The improvement that beggars belief in the trade figures seems too good to be true, however for some. Every administration likes to make it sound as if the figures are at last telling the country that the policies are having an effect on the economy. However, can we trust the Chinese to release date that is true? It would be better to be a data-skeptic where China is concerned until the signs are rippling through into other economies and show up elsewhere, quite frankly. Trade figures coming out of China must be matched against data that is being released from other countries at the same time. In the past that data from China and the figures from elsewhere usually show discrepancies that point to very different ways of calculating the balance of trade, to say the least. Markets showed that trade figures were being inflated by speculative capital flows earlier this year, for example.

Expansion of the Chinese economy has been fixed at 7.5% for 2013 by the Chinese administration, although that would mean the lowest growth in the economy for about twenty years. The Chinese economy expanded by 7.7% in the first quarter and by 7.5% in the second quarter this year. Analysts are expecting the Chinese growth to reach about 7% this year, below the official government estimates.

The question is now whether or not the slight gains will show through and become stable. If they are stable, then the economic signs that the Chinese economy is improving will show through. However, it is far too early to imagine that one month’s figures can show the upturn that is taking place in the Chinese economy. The structural problems still remain regarding capital allocation and also the thorny issue of shadow-banking that has still to be resolved in the country.

There have been months of doubt raging on about whether or not the Chinese economy is slowing down or not. Now, will those fears about the world’s second largest economy be allayed by the announcement of these figures by the Chinese administration? Most certainly, they will be taken as upbeat answers to criticisms of an economy that is slowing down. But, they will not be taken as read quite yet.

So, is China really on a new roll and in an upturn?

The Shanghai Composite increased today by 0.36% (up 7.34 to 2, 052.24) at 03:57 ET.


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