Analyst: official China lies about the economic recovery after the pandemic

Network analyst Pavel Spidel analyzed on his blog the current state of China's economy, which has been severely affected by the effects of the coronavirus epidemic:

“Data on China's GDP (minus 6.8% y / y and minus 10% q / q) raise questions about the degree of reliability, because the consequences of a shutdown of the economy are much larger at all levels (industrial production, household demand, commercial demand, and so on). In other words, the official data on China's GDP are overstated and the situation may be worse (up to 12-15% yoy)

Recently, China updated the monthly industrial production data in high detail by group. It is interesting to evaluate not abstract indices, but the physical production of goods of various categories. The failure by 2019 is significant and amounts to dozens of percent, especially in engineering and high conversion industries, but it is even more important to assess the level relative to past years.

The production of passenger cars in the 1st quarter fell more than twice compared to 2019 and is at the levels of 2008-2009. SUV (SUVs / crossovers) minus 40%, trucks minus 32%. The decline in tractor production is not so significant over the past year, but the downward trend since 2016 and the accumulated decline led to the destruction of almost all the growth of the last 10-15 years.

Machine tool construction, the production of industrial equipment, engines and power plants demonstrates the absence of any progress over the past 10 years, and it is important to note that production began to fall long before 2020, and the events of recent months have highlighted the accumulated imbalances even more.

The production of household and digital consumer goods (excluding TVs) in the mode of prolonged corrective stagnation from 2015-2016, the events of 2020 again only aggravated the situation.

There is a certain “growth point" in China's industry in the chemical industry, where it has not yet reached the threshold of development, but since 2017, the pace has sharply slowed to almost zero. What is presented on the histograms has a low added value and almost does not generate profit. Cement production best shows the real situation in the construction industry in China; almost 5% have been lost in 5 years.

Which sectors of China worked almost non-stop, ignoring the quarantine regime? These are mining and metallurgical sectors. In these sectors, there is practically no drop-out production relative to 2019, but judging by the growth in inventories, they stored about 20% of the output.

In the first quarter of 2020, oil and gas production, coal mining, primary processing of non-ferrous metals, production of tobacco products increased, but there was no expected increase in the production of medicines (minus 2.3%) by industry. The production of communication equipment, computers and components was fairly stable.

A strong decline in industries oriented towards consumer demand and in industries with high complexity / conjugation of production, where there are many production cycles / iterations and a significant number of external contractors (engineering, machine tool, aviation, shipbuilding). If the supply chain is violated, they are the first to be hit, because it is impossible to have stocks across the entire spectrum of intermediate components. Also, these industries are strongly tied to investment demand.

As you can see, there was no total stop of industrial production in China, and most industries worked without any restrictions at all - these are usually zero-redistribution industries and continuous-cycle production. But the most severe blow to industries associated with investment cycles and having high added value is also fundamental damage to the production of consumer goods. These data can be useful in the context of understanding the gap between integral indices, which show a slight decrease and what the situation is in the context of production sectors. And here everything is worse than it seems at first glance..."