Commentary
Now in 2023, China is again the focus of the economic outlook. Most forecasts, whether from the public or private sector, believe China will continue to be the key growth engine worldwide. Admittedly, China is producing a very high growth number compared to many other large economies. However, the 4-5 percent real GDP (year-over-year) growth rate corresponds to a composite Purchase Management Index (PMI) of 50, the boom-bust split. The Chinese government never explains why such markup exists, and not many in the market have ever questioned such an anomaly in forecasting.
Apart from this, everyone seems to believe without a doubt in the Chinese Communist Party’s assertion that the economy can be “restarted” at any time in any form at their wish. However, this works only on the supply side but not the demand side. For supply, it is always easier to pay the workers and turn on the machines. Yet demand depends on income and/or profits prospects as well as overall sentiment; the formers are economical, while the latter is psychological. Unfortunately, neither is favorable, given both housing and debt markets are deleveraging simultaneously….