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Home / Business / China's economy may be much weaker than the official data suggests

China's economy may be much weaker than the official data suggests



Growth in the world's second-largest economy cooled last year to its lowest level for nearly three decades, according to government data. Top ) ) ) Caterpillar ] has called China's weakness for their disappointing earnings.

The situation may be even worse than China's official statistics, according to many analysts.

"The Chinese published GDP figure is absolutely garbage," said Leland Miller, CEO of China Beige Bok advisory firm. "There is absolutely agreement that these numbers are unreliable."

His company gathers data from thousands of companies across different industries in China to present their own image of what is happening and draw their name from the US Federal Reserve's Beige Book report. Miller said the Chinese economy is "much, much weaker" at the moment than Chinese government figures suggest, and it's unlikely to turn around soon.
It is important for businesses to make investment and employment decisions, and for investors to find out where to put their money, based on the probable length and depth of the downturn . China is seizing the fallout from the government's efforts to cut down risky lending and trade war with the United States.

Some experts suspect that China's chief statistics, which report much of the country's data, are more focused on making the government look good rather than providing an accurate reflection of its financial health.

  China's public growth rate is much stronger than most major economies, but many analysts doubt the accuracy.
The agency is a "Communist Party Body First and an Honest Statistical Broker Others," Derek Scissors, a resident researcher at the American Enterprise Institute in Washington, wrote in a recent blog post.

It is difficult to determine China's true growth rate, as many government data "do not make sense", according to Saks, who is also c hief economist at China Beige Book. For example, the figures on the size of the economy relative to the average income of Chinese citizens do not match, he said.

Many other analysts take their own calculations to get a feel for how the economy does.

Research company Capital Economics examines a number of data, including sea freight, electricity generation and financial lending, to come up with a proxy indicator. Based on that, China's economy could only have grown by around 5% last year instead of the official 6.6%.

The slowdown has thrown gloomy over Chinese businesses.

"The economy will get worse in the coming months," said Wei Bingyu, the owner of an industrial paint factory in Beijing. He blamed the difficulties on trade war and other issues.

A closely monitored independent survey that measures the health of China's large manufacturing sector, sank to its lowest level for almost three years last year.

Chinese consumers feel pressured

Investors are considering the economy for signs of weakness, which to date has led to reduced industrial results and falling exports.
  Who's harmed (and who's not yet) from the economic downturn in China
Chinese behavior consumers are a key focus. Expenses from Chinese customers rose by almost 10% last year, according to official data. But the country's large car market shrank in 2018 for the first time in about 20 years, and the turnover on the moon this year this month grew at its slowest pace for over decades.

Official Chinese data is probably "excessive consumption growth," Julian Evans-Pritchard, senior Chinese economist at Capital Economics, said in a recent note to clients. He estimated that spending in China's large urban areas was reduced by about 3% last year, suggesting that medium-sized buyers are tightening their belts.

It counts with what some business owners say. Zhou Chang, the owner of a gym in central Beijing, told CNN that his customers are using less.

Using a gym "is not quite like eating, clothing, housing or commuting," Zhou said. "They are must-have while bodybuilding is not." As the economy slows down "many gyms have temporarily closed or gone bankrupt," he added.

  Some Chinese companies owe trade war with the United States for aggravated conditions.
But Chinese officials have shown signs of concern. They have tried to increase growth through measures such as tax cuts, more infrastructure expenses and looser monetary policy.
  China's stock market had a terrible 2018. This year it can be much better

"Still, it's still unclear how much the movement will do to stop the slowdown because many of the extra funds they release go to inefficient state-owned businesses instead of private businesses," analysts say.

Many private companies in China usually rely on shadow financing, unclear forms of lending that are kept out of the bank's official balances. Regulators have cracked down on these practices in recent years.

"It is extremely difficult to gain financial leverage as a private enterprise," said Guo Yucheng, the owner of a drug production business in the northern province of Jilin.

He recently merged his business with a state-owned company to improve the chances of accessing finance. He predicted that it would take as long as two years for tax cuts to make a real difference to struggling companies.

"There are as many companies as ours trying to get every month," Guo said. . "Private businesses go through a long winter."

Serenitie Wang, Julia Horowitz, Lily Lee and Eduardo Baptista contributed to this report.


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