Web for Notable Business Information in Japan
China￨Data : Husing Bubble,
Increasing Debt, Growth Slowdown
Ⅰ. China’s economic growth evaluated with the ‘Li Keqiang index’
In statistical data on the Chinese economy,
I think that the generated electricity is relatively reliable. There is almost
no import and export of electricity, and if you subtract a small amount of transmission
and distribution losses, it will be almost equal with electricity consumption without
time delay. Because data collection is relatively easy, it seems to be
Data on industrial production such as the
amount of electricity generated monthly released from the National Statistics
Bureau of China are summarized data of the current month submitted by
industrial enterprises above designated size.
Therefore, it is slightly different from
the year-on-year ratio calculated from the production volume released in the
same month of the previous year.
In Figure 1 showing the monthly electricity
generated, it is the influence of the Chinese Spring Festival that the amount
of electricity in January or February is decreasing. The Spring Festival based
on the lunar calendar has a year of January and a year of February. Therefore,
the ratio for January and February in the same month of the previous year will
be greatly changed. On this Web page, the increase ratio over the same month of
the previous year shows the total for the two months between January and
In Figure 1, China's monthly electricity amount has fluctuations, but overall
it seems to be increasing linearly. The amount of electricity is considered
to be the value at the generation terminal.
In the decade from 2005 to 2015, the amount of electricity increased 2.3
times. The annual electricity consumption in 2016 is 5.9 trillion kWh.
The annual electricity consumption in Japan is about 1 trillion kWh, so
it is about six times that amount. Since the population of China is about
ten times that of Japan, per capita electricity is still about 60% of Japan.
In 2016, thermal power plants, mainly
coal-fired power plants, accounted for 74%, and hydraulic power accounted for
18%. Nuclear power is still 3.6%, but it is expected to increase in the future
and is a threat. Wind power generation accounts for 3.6%, but solar power
generation is only 0.7%.
Figure - 2 shows the rate of increase in
monthly electricity generation compared to the same month of the previous yea.
The large decline to near -10% is due to the Lehman shock in September 2008.
Until then, the increase rate was around 15%.
After the Lehman shock, the Chinese government made a large fiscal stimulus
of 4 trillion yuan, and the economy recovered, and the increase rate in
electricity also rapidly rose. However, as the effect of 4 trillion yuan
is subsequently diminished, the increase in electricity volume had declined
rapidly since the latter half of 2011, adding the decline in exports to
Europe due to the euro crisis.
In 2013 when Xi Jinping regime began, the
amount of electricity once increased, then, continued to decrease. In 2015, the
month when the increase rate became minus was more.
Recently, since the latter half of 2016,
the increase rate of electricity has turned to an abnormal rise, which will
2. Rail freight transport
The statistics of freight traffic in China are indicated by four: rail
transport, highway (truck transport), water transport and civil aviation.
Figure - 3 and Figure - 4 show the ton base and ton - km based data for
On ton basis the most common is highway
transport, and rail transport is only 8% of the total. On the other hand, on
ton-km basis, the ratio of railway transport and water transport is larger than
that on ton basis, indicating that the ratio of long-distance transport is
It is believed that Li Keqiang put emphasis on the amount of rail freight
transport which is only a part of freight transport because it can be trusted
as statistical data. As China is a big country with doubts about even the
total population, we have to question the way how the amount of highway
freight transport is grasped every month.
Figure 5 shows the trends in ton-based
freight transport of three individuals excluding air transportation. Not only
the highway freight transport is high, but also the increase rate is higher
than railway freight transport. However, after 2014, it can been seen that the highway
freight transport has hardly increased.
Figure - 6 shows the trend of ton-based
monthly rail freight transport. There is no increase in around 2012, and it has
started to decline after 2014.
Figure - 7 shows the increase rate of total freight and rail freight transport
compared to the same month of the previous year. The fluctuation in the
amount of transport is shown amplified.
shock, and the rapid rise in the second half of 2009 is due to the overheating
of the economy by the large fiscal stimulus.
Although the increase rate has declined
since around 2011, it has not yet declined for the entire transport amount.
Although the economic growth rate has declined, it reflects the continuing
On the other hand, the increase rate in
rail freight transport is likely to fall into the minus range after 2012, and
it is largely depressed at the end of 2015. This is due to the decrease of coal
freight which accounts for about half of railway freight, and is due to the
decrease in iron and steel raw materials and steel materials.
However, like the amount of electricity,
since the middle of 2016, the increase rate in rail freight transport also
shows an abnormal rise, which is described below.
3. Electricity generation, rail freight
transport and GDP
On the other hand, the increase rate of
electricity generation and rail freight transport compared to the same month of
the previous year has changed significantly as described above. Both increase
rates declined minus from 2015.
However, the fact that the change in GDP growth rate is much smoother than
the increase rate of electricity and rail freight is a reason why
doubts are raised over the GDP value announced by the Chinese government.
There are many reports on doubts about China's GDP, but it is not the purpose
of this page to describe it.
GDP growth in 2016 rose to 6.7% until the
third quarter, 6.8% in the fourth quarter and 6.9% contrary to expectation in
the first quarter of 2017. Meanwhile, the increase rate of electricity generation
and rail freight transport has risen sharply from the second half of 2016.
These increases are understood to be due to
the economic recovery supported by housing bubbles and excessive fixed asset
investment. In addition, it is also believed that the reduction of excessive
facilities of state-owned enterprises in the steel and coal industries has not
achieved sufficient results.
However, the sharp rise in the increase
rate such as electricity generation is abnormal, perhaps reflecting the problem
of the Chinese economy. It can also be said that it is an efficacy to observe
the Chinese economy by the Li Keqiang index.
Ⅱ. Deceleration of the China's economy observed from the GDP breakdown
In this section, the deceleration of the
Chinese economy will be observed from the industrial breakdown of GDP which is
1. Meaning of GDP growth rate 6.5%
In the Chinese Communist Party convention
of 2012, Xi Jinping and the current standing committee has been appointed, a
plan to doubling the GDP and per capita national income by 2020 as compared to
2020 was announced. And Xi Jinping president in November 2015, mentioned the
prospect that GDP growth rate to be around 7% in five-year plan from 2016.
In order to double GDP in 2020 as compared
to 2010, it is necessary to make the average growth rate of GDP 2016 - 2020 be
6.5% or more.
After the Lehman shock, the Chinese economy, which has continued to grow
rapidly, has various problems such as excessive debts of local governments
left by real estate development, excessive facility capacities and excessive
debts of state-owned enterprises, soaring and falling stock prices, housing
In order to avoid the economic collapse,
the Chinese government has promoted structural transformation of the economy
from the economy of high growth driven by investment and export to the stable
growth led by consumption and domestic demand. They will push down the GDP
growth rate. Maintaining a GDP growth rate of 6.5% or more is a difficult task.
Secondary, Tertiary Industry
In Figure 9 shows the growth rate of GDP of
the last four years and the quarterly increase of the first, second and third
industries compared to the same period of the previous year.
In the primary industry, the increase rate
is around 4%, which is lower than other industries, and it is repeated about 1
point fluctuation. It is probably because agriculture has uncontrollable
variables such as weather.
Although the increase rate in secondary industry is not shown, it is around
17% before Lehman shock and the secondary industry had driven economic
growth of the whole industry. However, after falling in the Lehman shock
and recovering, the increase rate continued to decline, and after
2015 the increase rate is still around 6%.
of Secondary and Tertiary Industry
Before looking at the GDP breakdown, it is necessary to know the weight
of each breakdown of GDP. Figure 10 shows the industral breakdown of Chinese
GDP in 2016. In China, the agriculture, forestry and fishery industry is
only 9% of GDP.
Industrial production is the largest item
with GDP breakdown, accounting for 1/3 of the total. The construction industry
which is the rest of the secondary industry is about 7%.
In the tertiary industry, wholesale and retail trade is the largest, accounting
for about 10%. Following that, the major items are 6.6% of the finance
and the real estate. In China, the two major investments are stocks and
housing investment. In the period of high stock prices and housing prices,
the breakdown of GDP of the finance and real estate increase. The Chinese
government also uses relaxation and strengthening of regulations on those
transactions as a means of economic stimulus measures.
Most of the items grouped as others are
related to tertiary industries. It includes public services such as education,
research and development, medical health care, rental business, repair business
and so on. It accounts for 20% or more of GDP as a whole, and breakdown details
are not shown, so be careful.
rate of secondary and tertiary industry
Figure 11 shows the growth rate of
industrial breakdown of secondary industry and tertiary industry compared to
the same period of the previous year.
The breakdown of secondary industry is
industrial production and construction industry. The former accounts for more
than 80%, and the increase rate of industrial production shows the same change
as the increase rate of the secondary industry as a whole.
The increase rate in the construction
industry over the past four years has remained high at around 10% until the
middle of 2015, but it has fluctuated widely since then. Changes in the growth
rate of the construction industry are related to the growth rate of the real
estate industry, which is described later. It is also related to new housing
prices and trends in real estate development investment.
Changes in the growth rate of the tertiary
industry (service industry) breakdown is large and is complicated. The growth
rate of wholesale and retail trade was around 10% until 2014, but it has since
declined to the 6% level, which may reflect the recession. However, it is shown
that it is recovering from 2016.
The increase rate in the finance shows a
peak close to 20% in the second quarter of 2015. This corresponds to the
soaring stock price such as the Shanghai Composite Stock Price Index. Later,
due to the plunge in the stock market price in June 2015, the growth rate of
the financial also declined.
The increase rate in transportation,
storage and mail has declined from around 7% to 4% in 2015. However, it has
risen sharply since the second quarter of 2016. The decline in the increase
rate after 2015 seems to be due to recession, but the recent surge is an
abnormal change and it will be described later.
The increase rate in the real estate
declined to 2% from around 8% in 2013, then it increased again to 8%. This big
change is the result of the Chinese government's change in housing acquisition
When the economy retreats, regulations on acquisition of housing are relaxed,
and when the economy overheats and the occurrence of housing bubbles is
predicted, regulations have been reinforced repeatedly. In China, housing
and stocks are the two major investment targets, especially the housing
market has a large scale, so it has had a big impact on the economy.
The increase rate in the accommodation and restaurant
industry continues to be in the 6% range since 2014. The share in GDP is as
small as 1.8%, so its effect on GDP is not so large.
As mentioned above, "Other"
accounts for most of the tertiary industry, which accounts for more than 20% of
GDP, but the increase rate in the fourth quarter of 2016 jumped to 10.6% from
8.8% in the previous period It is felt strange. However, in the first quarter
of 2017, it has returned to the previous value.
rate in the fourth quarter of 2016
The GDP growth rate in 2016 rose by 0.1
points to 6.7% until the 3rd quarter and 6.8% in the 4th quarter.
As mentioned above, maintaining the average
GDP growth rate of more than 6.5% in 2016-2020 seems to be a big issue for the
Why did GDP growth in the fourth quarter of
2016 rise by 0.1 point? From Figure 11, the impact of the rise in transportation,
storage and postal from 6.5% in the third quarter to 9.9% and the fact that the
item "other" rose from 8.8% to 10.6% was significant. Regarding
transportation, storage and mail, it seems to reflect the fact that the freight
transport has increased due to economic recovery, but freight transport
accounts for a relatively small share of GDP.
On the other hand, the “other” items
account for more than 20% of GDP, which seems to have a big influence. The
breakdown is not shown, and as for the reason that the items with relatively
small fluctuations sharply increased, I can not forbid the feeling that the
Chinese government wanted to raise even a little GDP figures published.
By the way, assuming that the increase rate
of the “other” items in the fourth quarter is not 10.6% but 8.8%, which is on
par with the previous term, GDP growth rate for the full year of 2016 will drop
0.1 points to 6.6%. Whether such trial calculation shows actual conditions is
not certain but I think that the Chinese government is struggling with a slight
rise in GDP growth rate in increments of 0.1 points.
It was announced in the National People's
Congress that the target of GDP growth rate in 2017 should be around 6.5%. For
reference, Table 1 shows the breakdown of 6.5% that I suppose. Some items are
considerably higher than the 6.5% year-on-year rate of increase, while others
The increase rate in 2017 compared with
2016 is that the agriculture, forestry and fisheries industry will increase or
decrease production volume due to weather, but I think that it will be
comparable with the previous year except for that.
Industrial production will decline slightly
by somewhat reducing the excess facilities such as steel and coal.
The wholesale and retail industry will
maintain the increase rate in the second half of 2016 when the economy
If the housing bubble is suppressed, the economy will decline and it seems
that the GDP growth rate of 6.5% can be achieved. I think that the
economic measures to achieve 6.5% will be taken and the increase rate in
the financial industry will recover.
By summing up the GDP breakdown of Table 1,
the GDP growth rate will be 6.5%.
Ⅲ. Other economic data on China's economic slowdown
Here are some of the economic data that is
considered important for observing the slowdown of the Chinese economy. The
Chinese economy has been recovering from the beginning of 2016, but it is
important to understand the cause.
Figure 12 shows the trend of the increase
rate in industrial production relative to the same month of the previous year
in comparison with GDP. The increase rate in industrial production, which was
previously around 17%, has been around 6% since 2015, after the fall due to
Lehman shock and rapid recovery.
Changes in the GDP growth rate are not as
great as in industrial production, but it has continued to decline after the
Lehman shock as well. It can be seen that the high growth rate of the Chinese
economy has been supported by industrial production so far.
In the meantime, the growth rate of
industrial production is expected to further decline. The proportion of service
industries in GDP will increase, but decline in industrial production will
reduce GDP growth rate.
It is necessary to pay close attention to
when the increase rate in industrial production, which has been around 6% now,
drops to the next low level.
of excess facilities
Figure 13 shows the trends in the increase
in crude steel and cement production relative to the same month of the previous
year. The crude steel and cement production, which had been negative growth
since 2015, turned to an increase in 2016, indicating that reductions in excess
facilities have not progressed as planned.
Figures 14 and 15 show the trends in the production rate of ethylene, 10
kinds of non‐ferrous metals, automobiles and mobile phones compared with
the same month of the previous year.
The signs of increase in industrial
production which had been decreasing since the Lehman shock can be seen from
the beginning of 2016.
Real estate development investment
As of the end of the first quarter of 2017, the biggest risk in the Chinese
economy is the problem of housing bubble. In China without land privately
owned, residential real estate is subject to investment. The investment
scale is considerably larger than the stock investment.
In the phase of rising housing prices the
market will overheat. When the economic recession, the Chinese government
relaxed the regulation of the housing market and repeatedly reinforced the
regulation as the economy overheated.
Figure 16 shows the increase rate in real
estate development investment compared to the same period of the previous year.
It shows the total real estate development investment indicated by thick lines
and the breakdown of houses, office buildings and commercial buildings. Please
note that the increase rate is not the value of the current month but the
increase from the beginning of the year to the year-on-year increase.
Housing development investment accounts for
about 70% of real estate development investment and shows a similar change to
the graph of real estate development as a whole.
There is an increase in the increase rate
from the beginning of 2013 and the beginning of 2016. In those previous years,
for example, as shown in the graph of industrial production in Figure 12, the
economy is moving backwards, as a result of which relaxation of housing
Figures 17 to 20 show the trends in the newly constructed housing sales
price index of 70 cities in China. It is a price index with 2010 as 100.
Recently it has been rising since the
second half of 2015. It is considered that due to a sharp fall in stock prices,
housing acquisition has been relaxed as an economic measure, and surplus funds
have turned toward housing investment.
However, in the latter half of 2016, it was
not possible to leave the housing bubble, and the housing acquisition
regulation was strengthened. The rise stopped around October 2016, but the housing
prices are still maintaining a high situation.
Figure 21 shows the trend of the simply averaged
increase rates, month-to-month and year-on-year, of the housing sales price
index for 70 cities.
Current housing prices in big cities are
too high, so home prices will start to decline ahead. In the price reduction
phase, the funds invested in housing investment are raised, and price declines
are accelerated. As a result, the increase rate in investment in real estate
development, construction industry and production of related materials will
In order to avoid extreme events like the
collapse of the housing bubble, as in the past, the Chinese government seems to
repeat relaxation of housing acquisition restrictions.
As of the end of the first quarter of 2017
when house prices are high, you should understand that it is in a subtle phase
of entering a downturn.
Fixed asset investment
At the time of the Lehman shock, China made fiscal stimulus that is said
to be 4 trillion RMB, and the economy achieved a V-shaped recovery. European
countries where the economic recession has been backed up a lot in China's
However, China's debt increased as described later. Over the next two years,
the debt remained stable, but debts begin to increase rapidly around 2012.
In order to curb the increase in debt, the structure transformation from
investment to consumption-led economy is planned. After that, the growth
rate of fixed asset investment in China has continued to decline.
Figure 22 shows the trend of fixed asset investment in China over the same
month of the previous year. Please note that total fixed asset investment
and private sector value, but the cumulative increase rate since the beginning
of the year.
Recent situation (written in March 2017)
In 2016, it can be seen that the increase rate in fixed asset investment
in the private sector has declined greatly. It is thought to suppress the
increase of corporate debt and it is one factor of China's economic downturn.
Nonetheless, the decline in the increase rate in fixed asset investment as a whole is moderate, as the investment in fixed assets in the public sector is rapidly increasing. Although not shown in the graph, the year-on-year growth rate of fixed assets in the public sector has increased rapidly from about 11% in 2015 to about 19% in 2016.
Amid the economic downturn, public sector
fixed asset investment and housing bubble supported 6.7% GDP growth rate.
What is noteworthy is the rapid increase in
fixed asset investment growth in the private sector since the end of 2016. I
think that is one of the factors of the economic recovery mentioned above.
It is thought that the recovery of the
Chinese economy from the end of 2016 to the end of the first quarter of 2017
was supported by investment. Therefore, it is necessary to check whether it
leads to an increase in debt.
Import and export
As trade data has a partner country, human
operation and tampering are difficult and the data are considered reliable.
Figure 23 shows the change in the US dollar - based trade value in recent years
compared to the same month in the previous year, and Figure 24 shows the trend
in the trade amount.
Many economic indicators are only a decline
in the increase rate, but the exports and imports a problem since their amount
has decreased from 2015 to mid 2016.
Composite Stock Price Index
Figure 25 shows the trend of Shanghai comprehensive stock index. The two
peaks are for October 2007 and June 2015. The stock price rose abnormally
without any significant increase in industrial output etc.
As mentioned above, housing and stocks are two major investment targets
in China. The stock price rise in 2015 seems to be thought to be the result
of investment funds going to the stock as house prices fall. It seems that
fluctuations in stock prices do not reflect the state of the Chinese economy.
Manufacturing PMI (Purchasing manager’ index) is
introduced as Chinese economic information, as it is frequently published in
newspapers. Economic data is generally reported after the middle of the next
month, but the PMI is reported at the beginning of the next month and is characterized
by its quick reporting.
Manufacturing PMI is an indicator based on a
questionnaire survey to purchasing managers in the manufacturing industry and
is a leading indicator of economic transformation, which is thought to suggest
an economic expansion if it exceeds 50, and a recession if it falls below.
In the manufacturing industry PMI of China, there are
values of the National Bureau of Statistics and those by private enterprises.
In Figure 26 there is NBSC's belonging to the National Bureau of Statistics.
HSBC / Caixin is what HSBC of the financial group reported, then Caixin is
taking over. It is said that the latter is surveyed for smaller enterprises.
From 2016, it can be seen that the manufacturing PMI has
risen and is over 50.
Ⅳ. Increase in Chinese debt
The data presented so far shows that the Chinese economy
is recovering around the end of 2015 as the bottom. In particular, from the
fourth quarter of 2016 to the end of the first quarter of 2017, the growth rate
exceeded most predictions.
The Chinese economy should have been undergoing
structural transformation from investment and export-led high growth to
consumption and domestic demand led stable growth. That is because it was
thought that it was necessary to suppress the rapid increase in debt.
If the current economic recovery is supported by
investment, it is necessary to check whether it leads to an increase in debt.
In terms of total debt ratio of GDP, Japan is larger than China, but it
is pointed out that the debt has increased rapidly since 2012. In addition,
China is characterized by its large corporate debt.
The risk due to the rapid rise of debt is discussed using
the value of Credit-to-GDP gap. Credit-to-GDP gap is the difference between the
debt - to - GDP ratio and its long-term trend. It is used as an indicator that
the debt is excessive compared with the trend.
Figure 28 shows the ratio of GDP of total corporate and household debt
in China and its trends and gaps.
Based on the experience that most of the past financial
crisis occurred in 3 years when this gap exceeded 10%, it suggests that the
risk of a banking crisis within 3 years will increase if it exceeds 10%.
However, from the fourth quarter of 2016 when the Chinese
economy recovered, in the first quarter of 2017 private investment in fixed
assets has increased sharply. On the other hand, the data of the corresponding
corporate obligation was not reported from BIS at this point, but it is necessary
to check it by all means.
When seeing China's economic growth, it is important to check whether GDP
growth of more than 6.5% is maintained and whether debt increase is suppressed
Caution) The statistical data on this page is stated carefully based on
the original data. However, if you are interested in the description of
this webpage for the purpose of investment, business etc, please visit
the website of the National Statistics Bureau of China and check and judge
statistical data yourself. I will not be responsible for any damage suffered
by the above description or information.