Last year’s deep pessimism seems to have abated
Special points to highlight in this issue:
* While China’s first quarter GDP growth came in above expectations, at 6.4 percent year on year, this does not represent the recovery in the underlying economy that many analysts are claiming, not because the growth numbers are fake but simply because in China reported GDP growth tells us nothing about the performance of the economy. Higher GDP growth is an input into the performance of the economic system. It is the expression of a political decision to reduce the pace at which Chinese economic activity has been recently decelerating, and was fueled by much higher credit growth during the quarter of 2019.
* Higher-than-expected GDP growth came in spite of a continued slowdown in the growth rate of private sector fixed asset investment, even given the surge in real estate investment. Excluding real estate development, in other words, the private sector is not acting like there has been a renewed surge in growth and is not acting like it sees a great deal of growth potential.
* The last minute cancellation of the IADB meeting – which was supposed to have taken place in Chengdu a month ago – may tell us as much about political infighting within the Chinese leadership and the relative status of the PBoC as it does about Beijing’s very confused and difficult relationship with Caracas.
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