Magic numbers -GaveKal Dragonomics China Insight
This report by GaveCal Dragonomics sheds light on the divergent Chinese GDP growth forecasts for 2009, 8% as presented by the Chinese government, and 5% as expected by some foreign banks. The full report is now available for NEEC members.
Two numbers now dominate the discussion about China’s economy; both are uttered more as magical incantations than as scientific descriptions of reality. The object of this article is to break the spell cast by these two numbers and to get the reader thinking about reality again.
• The period from last October to the coming March represents the trough of the domestic cycle, not an indication of a deteriorating trend;
• Domestic fiscal and monetary resources are adequate to stabilize growth at a level which generates fair if unspectacular growth in employment, wages and productivity-enhancing investment; and
• Even if that growth turns out in reality to be around 5-6% – regardless of what rosier numbers the government chooses to publish – social stability is not seriously imperilled.