China’s latest GDP growth figure is in and everyone is surprised. Despite indications to the contrary China’s GDP grew by 7% in the second quarter of this year. Hallelujah!
This marks the second quarter in a row where GDP growth was exactly 7%. How delightfully precise and on target.
Not that there is any evidence that these statistics are fake.
China’s official statistics also show that electricity generation grew by only 0.6% in the first half of this year. Electricity generation data is viewed as being reliable. There is no evidence, that I’m aware of, showing it might be fake. So when GDP grows by 7% and electricity generation grows by 0.6% we should be worried. This is a rat that could be smelled by someone without a nose.
Similarly, household electricity consumption officially only grew by 2.2% last year. This is perplexing given that growth in household electricity consumption always outpaced growth in GDP in the past. If China’s GDP is really growing at 7% then why is the electricity being used in Chinese homes growing so slowly? For context, if it kept growing at 2.2% per year, it would take almost 60 years for China to catch up with Britain in terms of per-capita household electricity consumption.
If this rate of growth is real, then it might become politically troublesome for the Communist Party. The supposed deal between it and the Chinese people – we give you rapidly improved living conditions and you ignore the continued infringements of your human rights – does not look so good if it is going to take Chinese this long to catch up with the British in terms of electricity consumption.
Then we have cement. According to official data China produced 5.3% less cement in the first half of this year. Cement production is a relatively good proxy for the rate of construction in China. So, if the data is to be believed, China is now building infrastructure at a slower rate than before.
Likewise, steel production is down 1.3%, and demand apparently is down even more. This is a rapid turn around. The graph below shows historical annual growth in steel production in China up until 2014:
So, somehow or another China has gone from GDP growth requiring more steel, to GDP growth being consistent with producing less steel. And all in the space of a couple of years, apparently. Another rat.
Either the physical basis of China’s economic growth has changed drastically in the last couple of years, or China is juking the stats. It’s hard to believe it is not the latter.