Commentary
China’s second-quarter GDP grew only 0.4 percent on a year-over-year basis but contracted 2.6 percent compared to the first quarter. For years I have been reluctant to comment on the fake figures, but now the releases seem more down to the earth. Although the numbers are broadly in line with the proxy-composite PMI, which floated around 50 in the second quarter, the overall GDP change was still inconsistent with some key numbers, such as industrial profits and retail sales, which declined quite a bit. Moreover, unemployment, especially among the youth, was severe.
The consensus of the analytic circle attributed the second quarter to lockdown under COVID. No doubt this was important but short-lasting. Even excluding this and the massive lockdown in 2020 Q1, the growth of real economic activity has still been on a downtrend. The slope was getting more negative after the watershed in 2018: Before that, it had taken six years to edge down from 8 percent to 7 percent; after that, it took four years to plunge from 7 percent to a current trend level of 4 percent or slightly below. Clearly, the massive deleveraging explained such cliff falling….