China announced on Tuesday that its 2015’s economy grew 6.9%, matching economists and analysts’ expectation. The problem is nobody believes the Beijing-endorsed figures. That wasn’t the real economy – argue investor, economist, analyst and specialist. China has simply cooked a number that people wanted to see and hear.

Instead, they believe China’s National Bureau of Statistics has overstated the growth, as instructed by Beijing, in an effort to hide the truth about a slowing economy. But if Beijing had cooked the book, what’s the real economy for 2015? One of economy research firms – A. Gary Shilling and Co – believes China has inflated it by 100%, so the real growth was merely 3.5%.

 

Donald Straszheim, head of China Research at Evercore ISI, tried to get a breakdown of the newly released 6.9% growth figures. But China’s National Bureau of Statistics responded that the “total GDP” growth figure was what they will release, not itemized or components making up the number.

Of course, the conventional wisdom was you need the components or items to know the total. And since Beijing refuses to disclose them, it’s fair to assume they couldn’t justify the 6.9% growth figures hence it was cooked up. With the present economy gloom and doom, China has every reason to hide its real economy from spooking its own people.

 

Asset investor Wilbur Ross offered his reason why China’s 2015 growth was nowhere near 6.9%. That’s because “none” of the country’s rail car loadings, truck loadings, cement consumption, steel consumption, exports, natural gas consumption or electricity consumption consistently registered 6.9%. At best, he believes China’s growth for 2015 was at 4%.

To make things worse, China’s own official numbers seem to contradict one another. Beijing’s mouthpiece Xinhua reported November railways cargo fell 15.6% year on year, but surprisingly the state statistics office said industrial production through the year was up 6.1%. Essentially, that means China produces the goods which didn’t leave the factory at all.

 

But why is it so hard to believe China? That’s due to one word – transparency – a word that doesn’t exist in the vocabulary of the Government of China. It was like how Malaysian Prime Minister Najib Razak was caught with US$700 million in his private banking account. Even if he decides to tell the truth today, nobody would believe him.

On the same day China released the unbelievable 6.9% growth for 2015, it also announced the injection of more than 600 billion yuan (US$91.22 billion; £64.51 billion; RM399.16 billion) into the financial system to help ease a liquidity squeeze expected before the Lunar New Year holiday in early February. Clearly, this is another attempt to support a sell down.

 

As China’s economy is getting depressing with each passing day, analyst Albert Edwards from French bank Societe Generale thinks China would eventually trigger a global financial “Ice Age”, sending United States S&P stock market crashing, wiping as much as 75% of its value. Naturally, with America economy crashing, so does the global economy.

Has this been over exaggerated? Why the heck would U.S. economy collapse just because China sneezes? After all, the U.S. is a relatively close economy that is driven by its own domestic demands. Well, that’s because most of the companies in the S&P 500 have growth models that centre on China. Here’re some statistics from Deutsche Bank:

• Smartphone Market: 70% of all sales are coming outside of North America and Europe, 45% are sold in BRICs countries. Nearly 30% of Apple sales came from China.
• Pharmaceuticals Market: 43% of sales are outside of U.S. / EU / Japan.
• Education Market: 62% of all international students in the U.S. are coming from China.
• Social Media Market: Facebook, Google and Twitter receive about one third (33%) of their advertising revenue from emerging market.

Legendary investor George Soros has already announced the Chinese crisis is set to plunge the world into another economic depression. RBS, on the other hand, urged clients to “sell everything” as commodity and share prices are set to plunge. But the main culprit why the U.S., UK and the rest of the world would collapse isn’t China alone.

 

The American Quantitative Easing (QE) – injecting extra money into the financial system – has pushed up global asset prices, to insane level. Astonishingly, the British’s Bank of England and European Central Bank followed blindly in inflating prices. The best part was when the Federal Reserve hadn’t the courage to increase interest rate until now.

China has no other choice but to keep devalues its renminbi / yuan, which eventually would create global deflation and recession, possibly depression. Unemployment would skyrocket and when it finally burst, the Federal Reserve would be running naked with no weapon to go for a combat. You’ve been warned.

 

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January 20th, 2016 by financetwitter

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